Fires/floods cause more than US$2 billion in 2-Q cat losses

A wildfire that ravaged a large area of parkland at the Rodeo-Chediski Complex in Arizona over late June/early July this year is expected to cost insurers about US$120 million, according to loss estimates compiled by the Insurance Services Office (ISO). The losses include homeowners, auto and business claims.

The fire destroyed approximately 300 dwellings, resulting in a total of more than 6,000 claims. Insured property loss is expected to amount to about US$70 million, the ISO says.

The fires come on the heels of wildfires that hit Colorado’s Iron Mountain area in June, causing an estimated US$75 million in insured losses, according to the Rocky Mountain Insurance Information Association (RMIA). Among the losses, which include damage to buildings and personal property, living expenses and fire fighting efforts, about 30 homes were completely destroyed in the blazes. The RMIA notes that fire officials are predicting 2002 could be the worst year on record for wildfires in that state based on “tinderbox” conditions.

Insurers in Texas also have their hands full, dealing with claims from flooding across the state in early July that killed 8 people and caused overall damages of about US$1 billion. Thousands were forced from their homes and the American Red Cross predicts more than 48,000 homes were damaged by the flooding. Governor Rick Perry declared a state of emergency in 29 counties, asking for federal relief. Much of the damage to homes caused by wind-driven rain would be covered by insurance policies says the state’s Insurance Commission, and comprehensive auto coverage would pay for vehicles damaged in the storm. A federal flood policy covers damage from rising waters.

The Arizona fires were among the ten catastrophe events that cost U.S. insurers US$1.97 billion in claims in the second quarter of 2002, says the ISO. Severe weather between April 27 and May 3, hitting 17 states and producing nearly 250,000 claims, caused the bulk of the losses, at US$855 million. Nonetheless, the second quarter of 2002 was a far cry from last year’s loss of US$6.24 billion in the same period, largely the result of Tropical Storm Allison, and a second storm system that produced widespread damage in the St. Louis area. Both storms are among the top 10 costliest catastrophes ever.

Overall, the ten second-quarter 2002 cat events resulted in 550,000 claims, 290,000 of which were personal claims, 50,000 commercial claims and 210,000 vehicle losses.