Weather-related losses are hurting insurers’ bottom lines.
During the first half of 2017 alone, US insurers paid out $15.5 billion to cover the claims that resulted from severe weather. That makes the period the second-costliest half-year on record.
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Those payouts are hitting insurers in the wallet. On Thursday, The Travelers Companies reported a 10.4% slide in Q2 profit. The drop was driven largely by high catastrophe losses – and analysts expect American International Group, Allstate, Hartford Financial Services Group and Arch Capital Group to report similar losses in the coming weeks, Reuters reported.
And the forecast isn’t particularly encouraging for the future. Right now, at least, the frequency of severe weather shows no signs of letting up. Meteorologist Steve Bowen told Reuters that severe storm systems – the kind that bring hail and high winds – have traveled steadily out of the Rocky Mountains and into the central and eastern US throughout the year.
“We’ve seen this type of pattern many times before, but the frequency has been higher this year,” Bowen told the newswire. “Plus, these events have impacted densely populated areas, which drives the financial loss.”
Since most insurers don’t automatically hike their rates in the wake of a severe weather event, many have turned to reinsurers to shore up their profits, Reuters reported.
Ally Financial put reinsurance in place during the first quarter, after car dealerships it insures were damaged by severe hailstorms. Still, the bank suffered $42 million in weather-related losses during the first quarter, the newswire said.
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