2003 Catastrophe losses total $12.8 billion

2003 was the third costliest year for catastrophic losses in the past decade according to Insurance Services Office's Property Claims Services (PCS). P/C insurers paid $12.8 billion to homeowners and businesses for insured losses last year.

The losses occurred in 21 catastrophic events that prompted more than 2.6 million claims for personal and commercial properties and vehicles.

Catastrophic events occurred in 39 states with California suffering the highest insured losses ($2.1 billion), followed by Texas ($1.5 billion), Tennessee ($1.2 billion), Oklahoma ($1.1 billion) and Virginia ($1 billion).

A catastrophe is defined by PCS as an event that causes $25 million or more in insured losses.

Insurance failures decline in 2003

A total of 18 property/casualty insurers failed in 2003 according to a report by Weiss Ratings, Inc. That number is down from 25 P/C carriers that failed in 2002.

The largest P/C failures were:

Republic Western Insurance Company (Phoenix, Ariz.) with $577 million in assets; Reciprocal of America (Glen Allen, Va.) with $479 million in assets. (www.weissratings.com)

Merger creates Property Casualty Insurers

Two major industry associations merged in January 2004, creating Property Casualty Insurers (PCI). PCI is the successor to the Alliance of American Insurers (AAI) and the National Association of Independent Insurers (NAII).

The new association represents more than 1000 companies that underwrite 40 percent of the property casualty homeowners market and write more than $154 billion in annual premiums.

Jack Ramirez, former NAII president, is president and CEO of PCI. Rodger Lawson, former AAI president, is executive vice president. The organization is headquartered in Des Plaines, Ill.

Tort costs hobble economy

Tort costs are closing businesses and medical practices, costing jobs, raising prices and putting a damper on innovation and research according to David Snyder, spokesman for the American Insurance Association (AIA). Tort reform is at the top of AIA's agenda for this year.

The American Tort Reform Association (ATRA) has become energized in the wake of a recent report that confirms tort costs are taking a toll on the U.S. economy. The survey of 2002 tort costs sets the price tag of $233 billion for all lawsuits filed that year. The study found that inefficiency in the tort system hurts victims who received only 50% of the total awards given and only 22% recovery for economic losses.

Topping the lists of 2002 tort costs were asbestos litigation exposure, class action lawsuits and medical malpractice.

The Class Action Fairness Act, which passed the House last year, remains in a Senate committee. Pulled quote Tort costs amounted to a tax of $809 for every U.S. citizen in 2002 and accounted for more than 2% of the Gross Domestic Product.

American Tort Reform Association's Judicial Hellholes*

More companies expect to be sued

According to a survey by Chubb Group of Insurance Companies, nearly two in five privately held companies expect their directors or officers to be sued in 2004. Company officials believe the suits will come from shareholders, customers or vendors.

Chubb spokesperson Lisa McGee said the survey confirms what Chubb has been seeing in recent years - that the problem of litigation is hitting large and small companies and the trend appears to be growing. Many private companies indicate that they will conduct an assessment of exposures for directors and officers in 2004.