Insurance industry prepared for Hurricane Katrina

The U.S. property and casualty industry has enough capital and liquidity to withstand claims arising from Hurricane Katrina, one of the most devastating natural disasters in U.S. history, says the National Association of Insurance Commissioners (NAIC).Headquartered in Kansas City, Missouri, NAIC is a voluntary organization of the chief insurance regulatory officials of the 50 states, the District of Columbia and five U.S. territories.Presently, the U.S. property and casualty industry maintains policyholders’ surplus of roughly US $390 billion and holds assets in excess of US $1.3 trillion. State insurance regulators require insurers to maintain minimum levels of surplus to absorb the volatility inherent in property and liability policy coverages. Over 75% of the industry’s assets are held in marketable securities.Helping assure the solvency of the insurance industry is a primary focus of state insurance regulators. State financial analysts are well underway assessing the financial and operational impact of insurers affected by Hurricane Katrina, the NAIC says. Working through the NAIC, states will share assessments and coordinate the appropriate actions to help ensure claims are paid. "These financial results demonstrate that insurers are up to the task of making good on promises they have made to American businesses and consumers through their insurance policies," said Diane Koken, NAIC president and Pennsylvania Insurance commissioner. "Some smaller insurance companies will experience financial distress, but the overall condition of the industry should remain healthy." Advanced climate technologies used in recent years have assisted insurers to anticipate major natural catastrophes like earthquakes, hurricanes and tornadoes. "Over the last decade, insurers have become more sophisticated in their ratemaking techniques," said Tim Wagner, NAIC chair of the Property & Casualty Committee and Nebraska Insurance director. "In place of historical claims data that insurers traditionally used to price for catastrophic events, computer simulation models are used to develop estimated loss costs associated with catastrophic events, including hurricanes."