DEFRAYING THE ECONOMIC COSTS OF DISASTERS 
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. While catastrophes losses declined in 2006 and 2007, there were a number of costly disasters in 2008. U.S. catastrophe losses for the second quarter 2008 were about $6 billion, making it the second most costly second quarter since 2001, according to ISO’s Property Claims Service (PCS). This does not include a string of hurricanes that hit the coastal states beginning in July, including hurricanes Gustav and Ike, which caused $1.9 billion and $8.1 billion of dollars of insured property damage, respectively.


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 charts reflect total net insurance payments 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.
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 attacks18,77921,981
4Jan. 1994Northridge, CA earthquake12,50017,485
5Oct. 2005Hurricane Wilma10,30010,933
6Sep. 2008Hurricane Ike10,65510,655 (3)
7Aug. 2004Hurricane Charley7,4758,203
8Sep. 2004Hurricane Ivan7,1107,803
9Sep. 1989Hurricane Hugo4,1957,013
10Sep. 2005Hurricane Rita5,6275,973
(1) Property coverage only. Does not include flood damage covered by the federally administered National Flood Insurance Program.
(2) Adjusted to 2007 dollars by the Insurance Information Institute.
(3)  Estimated.  Expressed in 2008 dollars.

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. Does not include flood damage covered by the federally administered National Flood Insurance Program.
(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, 1988-2007 (1)

(2007 $ billions)



(1) Catastrophes are all events causing direct insured losses to property of $25 million or more in 2007 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.