Cars

Hail, pummeled cars loom over U.S. insurance results

[ad_1]

Shutterstock photo




By Suzanne BarlynJuly 24 (Reuters) - A hailstorm that pounded down on a
Subaru dealership in Plano, Texas, barely lasted 30 minutes, but
left behind a trail of smashed windows, dented hoods and
millions of dollars' worth of claims for an insurer to cough up.
    Damage to thousands of cars in dealership lots across Texas,
Nebraska, Oklahoma and other states are just some of the
weather-related losses that have been hitting U.S. property
insurers particularly hard in the first half of this year.
    "It got everything on the car - roofs, sides, mirrors and
back glasses," said Ronnie Cohen, new car director of Subaru of
Plano, describing the trail of destruction by golf-ball-sized
hail that inflicted at least $4 million in damage to 311 cars
plus $500,000 to the dealership building in March.
    Weather-related losses loom over the insurance industry,
which writes policies for everything from individual homes and
cars to large commercial real estate complexes. The profit
damage is becoming evident in second-quarter results.
    On Thursday, insurer The Travelers Companies Inc <TRV.N>
reported a 10.4 percent drop in second quarter profit, hurt by
higher catastrophe losses. [nL3N1KB438]
    Those losses, net of reinsurance, rose to $403 million in
the second quarter, from $333 million a year earlier, mainly due
to wind and hail storms across the United States, Travelers
said. Higher investment returns helped offset some of the pain.
    Analysts expect similar losses to weigh on American
International Group Inc <AIG.N>, Allstate Corp <ALL.N>, Hartford
Financial Services Group Inc <HIG.N> and Arch Capital Group Ltd
<ACGL.O> when they announce results in the coming weeks.
    All told, U.S. insurers paid out $15.5 billion to cover
claims related to severe storms that produced conditions such as
hail and fierce winds during the first half of 2017, the
second-costliest on record for such damage, according to Aon
PLC's <AON.N> reinsurance broker, Aon Benfield.

    STEADY STREAM OF STORMS
    The bad weather shows no signs of abating.
    A steady stream of storm systems that trigger hail and
fierce winds has traveled out of the Rocky Mountains and into
parts of the central and eastern United States, said Steve
Bowen, an Aon Benfield meteorologist. A warmer-than-usual Gulf
of Mexico has also helped fuel storms.
    "We've seen this type of pattern many times before, but the
frequency has been higher this year," Bowen said. "Plus, these
events have impacted densely populated areas - which drives the
financial loss."
    Above average sea-surface temperatures are among factors
that could set off a hyper-active Atlantic hurricane season
later this year, meteorologists said. They do not predict
whether any will make landfall in the United States.
    Weather-related losses and risks are, for the most part,
already priced into insurers' stocks, said Sandler O'Neill
analyst Paul Newsome. Weather does not typically prompt insurers
to hike premiums, except for unusual situations, such as after
Hurricane Andrew in 1992 or Hurricane Katrina in 2005, he said.
    Some insurers have turned to reinsurers to protect profits.
    For instance, Ally Financial Inc <ALLY.N>, a bank that
caters to the auto industry, put reinsurance in place midway
through the first quarter after strong hail storms ravaged
dealerships it insures.
    Nonetheless, Ally sustained $42 million in weather-related
losses during the first quarter. Weather problems have continued
into the second quarter, Chief Executive Officer Jeffrey Brown
told Reuters.
    "It's nasty," Brown said, but "I sleep a lot better at night
knowing that we have reinsurance in place."
    For their part, car dealers in hail-battered states are
trying to unload dented inventory at so-called "hail sales."
    Prestige Imports in Lakewood, Colorado, which sells high-end
brands like Porsche and Audi, was battered by hail on May 8. It
is offering deals on a "huge inventory" of damaged vehicles,
according to its website.
    At the Plano Subaru, mechanics repaired many hail-damaged
cars, which have passed safety inspections and now sell at least
$8,000 to $10,000 below the sticker price, Cohen said.
    The dealership was glad to have secured bad weather
insurance before the storms, he said. It still has to pay a
$240,000 deductible, but much less than the full $4 million tab.

 (Reporting by Suzanne Barlyn; Editing by Lauren Tara LaCapra
and Frances Kerry)
 ((Suzanne.Barlyn@thomsonreuters.com; +1-646-223-8550; Reuters
Messaging: suzanne.barlyn.thomsonreuters.com@reuters.net))

Keywords: USA INSURANCE/WEATHER






[ad_2]

Source link

Leave a Reply

Your email address will not be published. Required fields are marked *

2 × two =