Insured losses from winter freeze could hit $18 billion

pipe-burst

Insured losses from winter freeze could hit $18 billion

Thousands of claims from vehicles, homes and businesses are rolling in from Texas and other states as crippling winter weather continues.

A City of Austin worker surveys a recently mended water pipe after it froze in Austin, Texas, on Feb. 18, 2021. 

(Bloomberg) — Crippled by a winter storm, Texas and other states are becoming a hotbed of insurance claims, with analysts expecting a hefty bill for losses.

Insured losses could hit $18 billion for the winter weather, six times the yearly average, according to Karen Clark, whose firm models catastrophes. In Texas, one of the worst-affected regions, State Farm Mutual Automobile Insurance Co. has already seen as many claims because of frozen pipes in that state as it had across the U.S. all of last year, according to a spokesman for the state’s biggest home insurer. USAA said it’s received more than 20,000 claims tied to the weather, and the Insurance Council of Texas said it expects hundreds of thousands of claims from vehicles, homes, businesses and renters.

Texas is reeling from days of widespread blackouts and water shortages, with millions left in the dark. Homeowners are struggling with nasty side effects, including frozen pipes and water damage. Winter storms like this one can also spur fire claims as residents seek ways to keep their homes warm, according to Brian Haden, whose Haden Claims Services works as an adjuster representing policyholders.

“But the vast majority of claims will indeed be broken-pipe claims,” Haden said.

Clark’s current estimate, which includes states beyond Texas, would place this storm ahead of Hurricane Laura, which hit the U.S. last year, and far beyond the average annual loss for winter storms of $3 billion.

“It’s probably the perfect storm in some sense, with the temperature anomaly, plus the snow, freezing rain, some wind causing power outages over a wide area and with so much over Texas, combined with the issues they have with the power grid there,” Clark, founder of Karen Clark & Co., said in a phone interview. “The third aspect is the duration of the event — the extreme temperature anomalies lasted longer than previous cold waves.”

USAA expects the total claims to rise and said that most were due to power failures and freezing pipes. The bulk of the total losses will likely be tied to commercial properties since claims tend to be more expensive when a pipe bursts in a church or museum compared with a home, Clark said.

“More than half of this will be for commercial properties because commercial properties are the largest loss producers for winter-storm events,” Clark said. Compared with homes, commercial properties have flatter roofs that are more prone to collapsing under the weight of snow, she said.

The event could also spur interruption claims if businesses had to shut down because of damaged property, according to Lori Freedman, central Texas claim advisory leader for Marsh & McLennan Cos. She said claims are starting to roll in and are expected to increase in the coming days.

The failure of Texas’ power grid could bring claims tied to energy properties such as wind turbines or gas pipelines, depending on specifics of individual policies, insurance broker Mike Hogue said. An inoperable piece of equipment because of freezing temperatures, however, might work fine after a thaw and therefore not be covered.

“Generally speaking, those property policies would be tied back to physical damage to insured property from a peril that’s not excluded,” said Hogue, managing director of the energy practice at Arthur J. Gallagher & Co. “A weather event is not an excluded peril, but you had to have damage.”

Leave a Reply

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

Related posts

Audits

Insurance Mergers and Acquisitions Hold Steady in 2024

Despite a slight decline in overall insurance M&A activity, the industry remains at pre-pandemic transaction levels, signaling a resilient and evolving marketplace. According to a recent OPTIS Partners report, 750 insurance agency mergers and acquisitions were announced in 2024, a 10% drop from the 833 recorded in 2023. However, activity picked up in the latter half of the year, with a 21% increase over the first half, demonstrating sustained investor confidence. “The M&A market remains stable, with no rush to close year-end deals for the second consecutive year,” said Tim Cunningham, managing partner of OPTIS Partners. “We anticipate more large-scale transactions in the next 12 to 24 months, as firms continue to seek growth through strategic acquisitions.” What This Means for Skyscraper Insurance At Skyscraper Insurance, we understand the impact of these market shifts and remain committed to delivering top-tier risk management solutions. As industry giants consolidate, we continue to prioritize personalized service, innovative coverage solutions, and strategic growth to better serve our clients. Key 2024 Transactions ✅ AON Acquires NFP – AON completed a $13 billion deal to acquire NFP, a firm with $2.2 billion in revenue.✅ Marsh McLennan Expands with McGriff Insurance Services – A $7.75 billion acquisition strengthens Marsh’s footprint.✅ Arthur J. Gallagher Secures AssuredPartners – A $13.45 billion agreement set to finalize in early 2025. As major players reshape the landscape, Skyscraper Insurance remains a trusted partner for businesses navigating today’s complex risk environment. Our expertise in risk management and tailored insurance solutions ensures that clients continue to receive industry-leading protection. #WeShareYourVisionForABetterTomorrow#SkyscraperInsurance #RiskManagement #MergersAndAcquisitions #InsuranceIndustry

Read More
Technology

13 Ways AI Moves Insurance Marketing Forward

As professionals in the insurance industry, we at Skyscraper Insurance understand the allure of innovation. Much like a classic car enthusiast admires shiny, powerful machines, we embrace the transformative power of technology—especially when artificial intelligence (AI) drives forward insurance marketing. AI is not just a buzzword; it represents a monumental leap in marketing capabilities. But with this powerful tool, we must ask: Are we ready to harness its full potential responsibly? AI promises to revolutionize marketing, elevating our strategies from traditional methods to cutting-edge, data-driven practices. By understanding where and how to apply AI, Skyscraper Insurance aims to refine our marketing campaigns and achieve unparalleled success. The Enduring Value of Traditional Marketing Classic marketing methods—relationship-building, personalized service, and human intuition—remain integral to insurance. Strategies like direct mail, in-person networking, and grassroots campaigns resonate deeply within our industry. However, these approaches, much like vintage cars, can be labor-intensive and lack the scalability and efficiency of modern methods. To stay competitive, traditional marketing must evolve. By integrating digital tools into classic strategies, we can modernize our outreach while retaining its personal touch. At Skyscraper Insurance, we blend time-tested methods with advanced metrics, ensuring our campaigns are both effective and enduring. How AI Powers Precision in Marketing AI introduces unparalleled precision and efficiency into insurance marketing. Think of it as the most advanced smart vehicle—equipped with adaptive technology that enhances every journey. With AI, Skyscraper Insurance can: These tools allow us to navigate marketing challenges with the confidence of a self-driving system, ensuring smarter and safer campaigns. The Evolution of SEO Through AI AI is reshaping search engine optimization (SEO), enhancing traditional practices with cutting-edge capabilities: By integrating AI into SEO strategies, Skyscraper Insurance ensures our content remains visible and relevant in an ever-changing digital landscape. Adapting for AI Platforms As AI platforms like ChatGPT redefine content discovery, we focus on: Balancing traditional SEO with AI-driven strategies keeps our content effective across diverse platforms. Finding Harmony Between Tradition and Innovation At Skyscraper Insurance, we believe in blending the best of traditional marketing with the advancements of AI. Just as a classic car enthusiast might upgrade their vehicle without losing its charm, we integrate AI to enhance human relationships and intuition. Driving Forward With Confidence As we navigate the future of insurance marketing, Skyscraper Insurance combines the reliability of traditional methods with the innovation of AI. This dual approach ensures we stay ahead in delivering exceptional service and tailored solutions to our clients. Whether fine-tuning classic strategies or adopting AI-powered tools, we’re committed to helping you achieve your goals with precision and care. At Skyscraper Insurance, #WeShareYourVisionForABetterTomorrow.

Read More
Try your instant quote