WEISS RATINGSEight Insurers Command 65% Market Share
in Hurricane-Prone States
|Property and Casualty Insurers' Earnings Down 55% Since 1997|
PALM BEACH GARDENS, Fla., July 11, 2001 - In hurricane-prone states, 65% of residents are covered by just eight large property and casualty insurers, according to a recent analysis by Weiss Ratings, Inc., the nation's only provider of independent insurance company ratings and analyses.
In 2000, eight carriers commanded 50.4% of the market in Florida, 57.5% in North Carolina, 62.3% in South Carolina, 81.4% in Texas, and 64.1% in Louisiana. Those eight companies are:
Just two companies — State Farm and Allstate — controlled 39.8% of the total market share in the hurricane-prone states last year. Their shared market dominance in Florida where they hold one third (33%) of all policies is particularly striking.
"To understand why this is cause for concern, just remember what happened in the wake of Hurricane Andrew in South Florida," explained Martin D. Weiss, Ph.D., chairman of Weiss Ratings. "Insurers claimed it was unreasonable for them to be expected to cover risks of such magnitude and ceased writing new business, they asked regulators for help in paying claims, and they jacked up rates. Now, nine years later, those same players have achieved an even more dominant position in the market."
Over exposure in a hurricane-prone state portends danger for the financial health of an insurer. Already this year, $2 billion in damages were recorded in Texas and Louisiana as a result of Tropical Storm Allison, and 11 more named storms are predicted for the remainder of 2001. Last year, Zurich had the most exposure, with 36% of its total homeowners business in the five hurricane hurricane-prone states.
Among the remaining seven insurers, the exposure ranged from 11% (Safeco) to 32.7% (USAA).
The growing concentration of the homeowners insurance market is a national phenomenon that has been progressing for many years. At year-end 2000, the same eight insurers controlled a record 58% of the market, compared to only 26% in 1965, while State Farm and Allstate have increased their market penetration even more dramatically - up from just six percent of the national market in 1965 to 33.3% in 2000.
"With too few choices for consumers and too much risk for insurers, this over-reliance on a small group of companies for critical homeowners coverage is a major cause of concern for both consumers and state governments," said Dr. Weiss.
Profits of Property and Casualty Insurers Decline 55% From 1997 to 2000
The nation's property and casualty insurers, covering more than 30 lines of business, saw profits decline 55% in three, from $59.1 billion in 1997 to $26.7 billion in 2000. This drop was caused by a combination of increased underwriting losses and decreased investment income, which is typically used by insurers to offset underwriting losses.
In 1997, insurers' underwriting losses hit $875 million — their lowest point in ten years — and began climbing until they reached $27 billion in 2000. This three-year period coincides with the hardening of the underwriting cycle, which occurs as insurers raise rates in response to mounting losses.
Companies experiencing the largest decline in underwriting earnings from 1997 to 2000 are: State Farm Mutual Automobile Insurance Company (Ill.), declining $4.7 billion; State Farm Fire and Casualty Company (Ill.), declining $1.4 billion; Allstate Insurance Company (Ill.), declining $908 million; and United Services Auto Association (Texas), declining $817 million.
Notable Upgrades and Downgrades
Among the 2,478 property and casualty insurers recently reviewed by Weiss, 107 received upgrades, while 147 were downgraded.
Weiss issues safety ratings on more than 15,000 financial institutions, including property and casualty insurers, HMOs, life and health insurers, Blue Cross Blue Shield plans, banks, and brokers. Weiss also rates the risk-adjusted performance of more than 11,000 mutual funds. Weiss Ratings is the only major rating agency that receives no compensation from the companies it rates. Revenues are derived strictly from sales of its products to consumers, businesses, and libraries.
Consumers needing more information on the financial safety of a specific company can purchase a rating and summary analysis for as little as $7.95 through the Weiss Ratings web site at weissratings.com, or starting at $15 by calling (800)289-9222.
15430 Endeavour Drive, Jupiter, FL 33478 · (561) 627-3300 · www.weissratings.com