DEFRAYING THE ECONOMIC COSTS OF DISASTERS 
INSURERS ROLE IN DEFRAYING THE ECONOMIC COSTS OF DISASTERS

The insurance industry plays a vital role in helping individuals and businesses prepare for and recover from the potentially devastating effects of a disaster such as a catastrophic hurricane or earthquake. In 2005 property/casualty insurers paid out a record $61.8 billion in catastrophe losses, with five hurricanes—Katrina, Wilma, Rita, Ophelia and Dennis—accounting for $57.7 billion in insured damages, or 93 percent of total losses that year. In 2006 insurers paid an estimated $8.8 billion to cover catastrophes, which generated 2,272,000 claims for damage to personal and commercial properties and vehicles, according to ISO’s Property Claims Services (PCS). Personal lines claims accounted for 58 percent of the total, while commercial lines claims were at 9 percent and vehicle claims were 33 percent.
CATASTROPHES IN THE UNITED STATES

ISO defines a catastrophe as an event that causes $25 million or more in insured property losses and affects a significant number of property/casualty policyholders and insurers. The estimates in the following chart represent anticipated insured losses from catastrophes on an industrywide basis, reflecting the total net insurance payment for personal and commercial property lines of insurance covering fixed property, vehicles, boats, related-property items, business interruption and additional living expenses. They exclude loss-adjustment expenses. Losses from catastrophic events declined in 2007 for the second consecutive year and were at the lowest level since losses totaled $5.9 billion in 2002. The number of catastrophes dropped from 33 events in 2006 to 23 in 2007, the lowest since the 2004 total of 22 events.
THE TEN MOST COSTLY CATASTROPHES, UNITED STATES (1)


 
 
 
Insured loss ($ millions) 

Rank
Date
Peril
Dollars when occurred
In 2007 dollars (2)
1Aug. 2005Hurricane Katrina$41,100 $43,625
2Aug. 1992Hurricane Andrew15,50022,902
3Sep. 2001World Trade Center, Pentagon terrorist attacks18,80022,006
4Jan. 1994Northridge, CA earthquake12,50017,485
5Oct. 2005Hurricane Wilma10,30010,933
6Aug. 2004Hurricane Charley7,4758,203
7Sep. 2004Hurricane Ivan7,1107,803
8Sep. 1989Hurricane Hugo4,1957,013
9Sep. 2005Hurricane Rita5,6275,973
10Sep. 2004Hurricane Frances4,5955,043
(1) Property coverage only.
(2) Adjusted to 2007 dollars by the Insurance Information Institute.

Source: ISO's Property Claim Services Unit; Insurance Information Institute.
INSURED LOSSES, U.S. CATASTROPHES, 1998-2007 (1)




Year
Number of
catastrophes
Number of
claims (millions)
Dollars when
occurred ($ billions)
In 2007
dollars (2)
($ billions)
1998373.6$10.1$12.8
1999273.28.310.3
2000241.54.65.5
2001201.526.531.0
2002251.85.96.8
2003212.712.914.5
2004223.427.530.2
2005 244.462.366.1
2006332.39.29.5
2007231.26.76.7

(1) Includes catastrophes causing insured losses to the industry of at least $25 million and affecting a significant number of policyholders and insurers.
(2) Adjusted to 2007 dollars by the Insurance Information Institute.

Source:  ISO's Property Claim Services Unit; Insurance Information Institute.

INFLATION-ADJUSTED U.S. CATASTROPHE LOSSES BY CAUSE OF LOSS, 1987-2006 (1)

(2006 $ billions)



(1) Catastrophes are all events causing direct insured losses to property of $25 million or more in 2006 dollars. Adjusted for inflation by ISO.
(2) Includes hurricanes and tropical storms.
(3) Excludes snow.
(4) Includes other geologic events such as volcanic eruptions and other earth movement.
(5) Does not include flood damage covered by the federally administered National Flood Insurance Program.
(6) Includes wildland fires.

Source: ISO's Property Claim Services Unit.