Despite Sandy, Some Homeowners Loss Ratios Lower Than 2011

Despite the wide swath Hurricane Sandy cut up the East Coast, homeowners writers in Pennsylvania, Maryland, Rhode Island and Connecticut report decreases in 2012 homeowners adjusted loss ratios, according to preliminary data from BestLink, A.M. Best's online financial system.

Sandy was an unusual storm for several reasons, one of which was its girth. The storm had a very large wind radii and was more than twice the size of 2005's Hurricane Katrina. Despite the storm's size, some insurers in states surrounding hard-hit New Jersey currently report adjusted loss ratios lower than in 2011, when Hurricane Irene drenched the East Coast.

The adjusted loss ratio is the measure of direct losses incurred divided by the difference between direct premiums earned and dividends to policyholders.

Of those four states, Connecticut reports the most significant improvement. Early financial data from six leading Connecticut homeowners writers reported a 2012 adjusted loss ratio of 57.8, compared with 118.7 in the prior year.

While adjusted loss ratios in the four states are currently trending downward, some individual companies report significant declines. Erie Insurance Group in Pennsylvania — the third-largest writer of homeowners insurance in the state in 2011 — reports a 2012 ratio of 63.93, down from 112.26 in the previous year. Allstate in Rhode Island — the largest homeowners writer in the state in 2011 — reports a 2012 figure of 30.83, down from 73.23 in 2011. USAA Group in Maryland — the sixth-largest homeowners writer in 2011 — reports a 2012 ratio of 95.41, down from 138.79.

New York and Delaware have adjusted loss ratios trending upward in 2012, but still less than 100.

In New York, four of the top five writers in 2011 have reported 2012 figures. Those companies report a 19-point increase in the average adjusted loss ratio to 74.8, the highest level in the past five years. Seven of Delaware top 2011 homeowners insurers have reported 2012 data, which currently show a 12.2 point increase in the average ratio to 51.8.

Conversely, many homeowners insurers in New Jersey are reporting 2012 adjusted loss ratios more than 100 and the current market average is 120.2, while it was below 100 in 2011. New Jersey took the brunt of Hurricane Sandy's blow, which led some industry analysts to expect elevated losses in the state (Best's News Service, Nov. 21, 2012).

(By Michael Buck, senior associate editor, BestWeek: Michael.Buck@ambest.com)