Winter Season Costing P/C Insurers Big Bucks, Moody’s Says

The 2020-21 winter season will be an expensive one for U.S. property/casualty insurers, Moody’s Investors Service said today.

The winter storm that began Monday and continues to cripple Texas and other Gulf Coast states will lead to billions of dollars in claims for property/casualty insurers, Moody’s said. Several U.S. winter storms have already occurred in the 2020-21 season, including the mid-December Nor’easter in New England and Mid-Atlantic states and the Groundhog Day Nor’easter in early February. Moody’s expects that total insured winter storm losses already exceed those for the 2019-20 winter.

In addition to damaged home exteriors because of snow, Moody’s expects losses from flooding and other water damage caused by frozen and broken pipes. Although homeowners and commercial property insurance policies generally do not cover losses from natural floods, the insurance policies do cover floods from broken pipes inside insured buildings. The storm also included destructive tornadoes in North Carolina and Alabama, but because Winter Storm Uri so battered Texas, insurers with high homeowners premiums in that state will likely face larger losses, Moody’s said.

Commercial property insurers will also incur claims for property damage, Moody’s said. Utility service interruption coverage, which is optional in many commercial property policies, generally has a specific interruption period such as 24 or 48 hours before coverage is triggered. With swaths of Texas lacking power or water for more than 24 hours, service interruption losses could accumulate for commercial property insurers, depending on how long the interruptions persist.

Moody’s expects that auto insurers will also report higher claims. Icy roads can lead to high numbers of automobile accidents in southern states, where drivers are not as familiar with snowy conditions and where cars sometimes use summer tires year-round.

Based on past winter storms, Moody’s expects insured losses will run in billions of dollars. The last winter storm event to exceed $1 billion was Winter Storm Quinn, which hit the Northeastern U.S. in March 2018.

Winter storms are a significant catastrophe peril for U.S. insurers. According to Munich Re, total insured losses from U.S. winter storms averaged more than $2 billion between 2010 and 2019. The record was 1993, which included the “Storm of the Century” that affected the Southern to the Northeastern U.S.

Susan Rupe is managing editor for InsuranceNewsNet. She formerly served as communications director for an insurance agents' association and was an award-winning newspaper reporter and editor. Contact her at [email protected]. Follow her on Twitter @INNsusan.