US winter storm Uri

Posted 19/02/2021 – Quick takes

The big freeze across many parts of the US could result in a significant industry insured loss, with an early estimate from modelling company Karen Clark and Company suggesting a $10bn+ event.

Texas has seen much of the media coverage, but it is a widespread and ongoing loss in the US affecting multiple states with freezing temperatures, snow and storm activity. Homeowners and commercial property owners have been left without heat, electricity and sometimes water, energy systems have been compromised and motor risks have also been affected. Add in the potential for knock-on living expense and business interruption claims – complicated by the COVID-19 pandemic during which many businesses will have closed their doors – and it can be appreciated why a large number of claims are expected.

Historically, the most expensive winter storm since 1980 was the ‘superstorm’ of 1993. Moody’s have estimated an insured industry loss for that event of c. $9bn inflated to today’s values.

Alpha comment

Although this will be a significant loss to the insurance industry, perhaps one of the costliest winter storms on record, the effect on Lloyd’s syndicates who write important reinsurance accounts is not expected to be substantial. Much of the loss will fall to the big US homeowners or commercial property insurers who have sizeable reinsurance retentions and, although Texas will see a concentration of claims, the wide-spread impact of this extreme winter weather event is likely to have a diluting effect on the smaller insurers with more concentrated books. Policies would also need to insure flood damage for the coming thaw, a coverage not uniformly bought by insureds. With all this uncertainty, therefore, and as this event may take some time to quantify due to the multiweek duration of the freezing temperatures in places, it is hard to make an accurate loss estimate at this early stage.

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