Busiest Hurricane Season on Record Finally Ends

Damage At $60 Billion and Climbing

November 29, 2005

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Hurricane Season 2005 officially comes to a close November 30 but its economic, political and human effects will be felt for years to come. Nationwide, this season was the busiest on record, with 27 named storms and 11 federal disaster declarations.

Damage caused by hurricanes Wilma, Rita and Katrina will cost the global insurance industry an estimated $60 billion, according to Swiss Re, a global reinsurer. The unusual severity of the storms has rocked the global insurance industry, putting most companies well into the red.

The year's three most devastating hurricanes, Katrina, Rita and Wilma, together account for $45.2 billion, or 90 percent, of the total catastrophe loss from 22 events.

Losses are likely to climb with additional claims expected for Katrina, Rita and Wilma. Additional winter storms through the end of the year could drive this year's catastrophe losses even higher, according to insurers.

"The impact from these storms had initially been underestimated, and this is now the payback for that," said Hannover Re, the world's third-largest reinsurer.

Black Eye

Besides the economic cost, the hurricanes have left the insurance industry with a black eye and at least one insurance executive says the industry has itself to blame.

William Stiglitz, president of the Independent Insurance Agents and Brokers of America, said insurers have been "too slow" to respond to Hurricanes Katrina and Rita, with thousands of claims still to be processed.

Stiglitz also said the recent catastrophes have exposed major problems with the federal flood insurance program.

"The total devastation has made it even difficult to find locations of houses and then much less try to find the insureds who might be scattered across the country," noted Stiglitz.

He cited figures that he attributed to the American Red Cross that as many as 680,000 single family homes in the Mississippi, Alabama and Louisiana were damaged by the hurricanes. "That's an incredible number - almost three-quarters of a million homes destroyed. And we've got to try to adjust them. So I think we've got quite a lot of work to do."

Catastrophe Fund

There's growing support for a National Catastrophe Fund that would provide assistance for insurance claims after a natural disaster anywhere in the country. Officials from around the country met last week in San Francisco at a National Catastrophe Insurance Summit.

U.S. Reps. Ginny Brown-Waite and Clay Shaw of Florida recently introduced legislation to create such a fund.

The federal legislation encourages states to establish catastrophic funds to prepare for natural disasters. States' catastrophic funds would then be backed up by a federal fund named the Consumer Hurricane and Earthquake Protection Fund. The fund, administered by the U.S. Treasury, would share the cost of catastrophic losses after states' catastrophe funds had been exhausted.

The National Catastrophe Insurance Summit was hosted by California Insurance Commissioner John Garamendi, Florida Insurance Commissioner Kevin McCarty, New York Superintendent of Insurance Howard Mills, and Illinois Insurance Director Kevin McRaith, as well as leaders from the National Association of Insurance Commissioners.

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