Insurers' 2011 Catastrophe Losses Hit Record

January 05, 2012, 12:11 AM EST By Nicholas Comfort and Carolyn Bandel

(Updates with company comment in fourth paragraph.)

Jan. 4 (Bloomberg) -- Japan’s earthquake and U.S. storms helped make 2011 the costliest year on record for insurance companies in terms of natural-disaster losses, according to Munich Re.

Several “devastating” earthquakes and a large number of weather-related catastrophes cost insurers $105 billion, more than double the natural-disaster figure for 2010 and exceeding the 2005 record of $101 billion, the world’s biggest reinsurer said in an e-mailed statement today. Competitor Swiss Re earlier estimated that the industry’s claims from natural catastrophes reached $103 billion.

Global economic losses jumped to $380 billion last year, surpassing the previous record of $220 billion in 2005, with the quakes in New Zealand in February and Japan in March accounting for almost two-thirds of the losses, Munich Re said.

“We had to contend with events with return periods of once every 1,000 years or even higher at the locations concerned,” Torsten Jeworrek, Munich Re’s board member responsible for global reinsurance, said in the statement. “We are prepared for such extreme situations.”

Japan’s earthquake and subsequent tsunami may cost insurers as much as $40 billion and the quake in New Zealand may cost $13 billion, the reinsurer said. Floods in Thailand were the third- costliest event at about $10 billion.

Other catastrophes included Hurricane Irene, causing $7 billion in insured losses, and severe storms and tornadoes in the U.S. in April, costing $7.3 billion.

For the first time, the U.S. National Oceanic and Atmospheric Administration classified a low-pressure system over the Mediterranean as a tropical storm, Munich Re said. Tropical storm Rolf made landfall on the French Mediterranean coast in November.

--Editors: Keith Campbell, Steve Bailey.

To contact the reporters on this story: Nicholas Comfort in Frankfurt at ncomfort1@bloomberg.net; Carolyn Bandel in Zurich at cbandel@bloomberg.net

To contact the editor responsible for this story: Frank Connelly at fconnelly@bloomberg.net

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Catastrophes Slash U.S. Insurers’ Profits

December 28, 2011, 12:03 AM EST By Noah Buhayar

Dec. 27 (Bloomberg) -- U.S. property and casualty insurers’ profitability fell to the lowest level since 2008 as losses from natural disasters exceeded gains in sales and investment income.

Insurers posted a 1.9 percent annualized rate of return on policyholders’ surplus, or cushion against unexpected claims, in the nine months through Sept. 30, according to a statement today from the Property Casualty Insurers Association of America. That’s the lowest since the 1.2 percent return in 2008, when the industry faced losses from Hurricane Ike and on investments.

Travelers Cos. and Allstate Corp. are among insurers raising prices for coverage to boost shareholder returns after claims from storms and low interest rates pressured results. Policy sales rose to $115.7 billion in the third quarter from $111.1 billion a year earlier, according to PCI.

The increase in sales “was blunted somewhat by deteriorating underwriting results,” Robert Gordon, PCI’s senior vice president for policy development and research, said in the statement. “Current low interest rates and the Federal Reserve’s pledge to keep interest rates low for some time to come continue to put pressure on insurers’ investment income.”

Catastrophes, including Hurricane Irene, which made landfall in North Carolina in August then lashed the U.S. East Coast with rain and winds, cost the industry $9.5 billion in the third quarter. That compares with $2.9 billion a year earlier.

Net investment income rose 1.4 percent industrywide to $11.7 billion in the third quarter, according to the statement, which was jointly produced with ISO, a unit of Verisk Analytics Inc., and the Insurance Information Institute, a trade group.

Travelers, Allstate

Travelers Chief Executive Officer Jay Fishman said at an investor conference this month that his company is driving “for improved rate and terms” across its business. Tornadoes in April and May wiped out the New York-based insurer’s second- quarter profit. Irene contributed to a drop in net income in the third quarter.

Allstate, the largest publicly traded U.S. home insurer, said in October it received approval from regulators to boost rates for its main line of homeowners’ coverage in 15 states in the third quarter. The premium increases averaged about 14 percent, the Northbrook, Illinois-based insurer said.

Insurers’ net income plunged in the period 69 percent from a year earlier to $3.2 billion, according to the statement.

--Editors: Dan Reichl, William Ahearn

To contact the reporter on this story: Noah Buhayar in New York at nbuhayar@bloomberg.net

To contact the editor responsible for this story: David Scheer at dscheer@bloomberg.net

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Insurers May Owe $1 Billion in Unpaid Benefits

May 20, 2011, 4:12 PM EDT By Alexis Leondis

May 19 (Bloomberg) -- Life insurers may be keeping at least $1 billion in unclaimed benefits owed to policyholders, beneficiaries or states, according to a Florida regulator.

Florida Insurance Commissioner Kevin McCarty, who made the estimate, said it was a “conservative number,” in a conference with reporters during a break in a hearing today in Tallahassee. Officials from MetLife Inc., the largest U.S. life insurer, and Nationwide Mutual Insurance Co., the policyholder-owned insurer, were subpoenaed to appear at a hearing by the Florida Office of Insurance Regulation to explain how they determine when policyholders have died.

“We want to ensure that insurance companies use as much effort to find and pay benefits as they do to find and collect premiums,” McCarty said during the call with reporters.

The hearing, which was attended by representatives from about 15 states, was held to help determine whether life insurers use Social Security Administration death records to stop annuity payments, without using that same data to identify life insurance policyholders who have died.

Liability for life insurance begins when the company receives proof of death, which is different than what happens in the annuity business, according to testimony by Todd Katz, executive vice president of insurance products for New York- based MetLife. If annuities continue to be paid out to deceased recipients, the insurer may have to reclaim those payments, he said.

Death List Check

MetLife began using Social Security data to stop some annuity payouts starting in the late 1980s, Katz said. The insurance company started using the death list to identify some life insurance policyholders’ deaths around 2004. The insurer used the death record to conduct a sweep of most of its life insurance policies in 2007 and in 2010 decided it would check the list at least once a year. When matches are made, an investigation begins and beneficiaries are contacted, Katz said.

MetLife paid more than $11 billion to beneficiaries in 2010 and turned over $51 million to the states, according to a statement from the insurer.

Using the Social Security death list “can be valuable as an aid in preventing errors and fraud and as a safety net to identify the small fraction of deceased insureds and account holders for which the company may not receive a claim in the ordinary course,” a MetLife statement said.

MetLife officials have also been subpoenaed to appear at a hearing in California on May 23. The National Association of Insurance Commissioners, the organization of state regulators, said this week it had formed a national task force, led by Florida, to help coordinate investigations into whether companies failed to pay benefits to beneficiaries of life insurance policies.

Hancock Settlement

The group includes members from California, Illinois, Iowa, Louisiana, New Hampshire, New Jersey, North Dakota, Pennsylvania and West Virginia, according to a statement from the NAIC. Model laws may be established to provide more uniformity for unclaimed benefit practices, McCarty said.

Florida’s insurance office announced a settlement with John Hancock yesterday, in which the insurer agreed to pay money to beneficiaries with interest dating from the date of death. The settlement also includes a payment of $3 million to the state, of which $600,000 was waived, according to a statement from the insurance office.

John Hancock, a unit of Toronto-based Manulife Financial Corp., agreed to restore the full value of more than 6,400 accounts, denied any wrongdoing and also agreed to establish a $10 million fund to facilitate payments to beneficiaries that cannot be contacted, the statement said.

“This agreement is consistent with John Hancock’s longstanding commitment to keeping our promises to owners and beneficiaries of our products,” the company said in statement.

--With assistance from Margaret Collins in New York. Editors: Rick Levinson, Dan Kraut.

To contact the reporter on this story: Alexis Leondis in New York at aleondis@bloomberg.net

To contact the editor responsible for this story: Rick Levinson at rlevinson2@bloomberg.net

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