U.S. P&C Insurers See Record Losses from Texas Storms: Fitch

U.S. property/casualty insurers are expected to face record 1Q21 catastrophic losses due to extensive property damage from last week’s severe winter weather in Texas, Louisiana and other southern states. Extremely cold temperatures and ice are generating hundreds of thousands of claims from frozen/burst pipes, roof damage, power outages and lost business income that will pressure near-term insurer results. However, losses are likely most concentrated within large homeowners writers that have effective claims resources and are well capitalized to absorb short-term volatility from outsized catastrophic events, Fitch Ratings says.

Source: Fitch Ratings | Published on March 1, 2021

Texas has 4.9 million homeowners’ policies with over $10 billion in annual written premiums, according to the Texas Insurance Department. Catastrophe losses tied to storms in southern states are expected to materialize from homeowners and auto business and various commercial insurance coverages. The widespread scale and claims volume of the event could drive ultimate insured losses to a range of $10 billion to $20 billion. As a point of reference, U.S. industry first-quarter catastrophe losses have averaged $4.6 billion over the prior 10 years, with a high of
$7.6 billion in 2017. 1Q21 catastrophe losses are usually relatively low to moderate and have represented only 16% of total catastrophe losses over that 10-year period, based on data collected from ISO’s Property Claims Services unit loss estimates.

Given the wide geographic spread of the event, a large number of individual carriers are likely exposed to losses from these events. Insured losses in Texas are likely heavily weighted toward personal lines coverage from homeowners losses and, to a lesser extent, automobile claims relative to commercial lines coverage. Based on 2019 direct premium volume, the largest homeowners writer in Texas and Louisiana combined by some measure is State Farm Mutual Insurance Group (19.6% market share) followed by The Allstate Corporation (13.6%) and USAA (9.4%).