For insurers, accounting for meteorological violence begins

By Damian J. Troise


NEW YORK _ Allstate expects insurance losses of about $593 million in August after Hurricane Harvey left a path of destruction along the Gulf Coast.

The initial accounting Thursday follows warnings from other insurers that are tallying the damages from a hurricane season that is nowhere near being over.

Allstate’s monthly losses, which likely have not been fully accounted for, are more than three times the $181 million recorded in July before hurricanes devastated islands in the Atlantic and began to strike the U.S.

Harvey made landfall in Texas on August 25. More than half the losses from that storm are related to vehicle damage.

The insurer, based just outside of Chicago, says that because of widespread damage and the inability of people to get to their homes or cars, its estimated losses may grow. Hurricane Irma slammed into Florida this month and Allstate has not released its estimates for that storm.

Last week, German reinsurer Munich Re, which covers losses from insurers, was the first to warn that it may not meet previous financial goals following the one-two punch of Harvey and Irma, which made landfall in Florida September 8.

The Insurance Council of Texas, the nation’s largest state insurance trade association, estimates overall insured losses from Harvey at nearly $19 billion. That includes an estimate from the Federal Emergency Management Agency in which Harvey’s flooding will result in $11 billion in payments to homeowners with flood insurance. Those flood losses would be the second highest on record, trailing only Hurricane Katrina’s $16 billion.

Harvey flooded a vast area stretching from Houston to the Louisiana border. The storm caused 70-plus deaths and damaged or destroyed more than 250,000 homes and hundreds of thousands of automobiles. Irma carved a path of destruction through the Caribbean and then enveloped Florida.

CoreLogic, a property data company, expects damage to commercial and residential property from Irma to range from $42.5 billion to $65 billion. That estimate includes insured and uninsured losses.

The damage, particularly from Irma, was expected to be much worse and stock in insurance companies, while down, has remained fairly flat over the past month, and many are up sharply for the year.

Yet the hurricane season runs through November and on Thursday, the entirety of Puerto Rico was without power and besieged by landslides and floods after Hurricane Marie slammed into the island as the third-strongest recorded storm to make landfall in the U.S.

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Analysts see Trump threats to insurers boosting premiums

By Alan Fram


WASHINGTON _ Average premiums for individually purchased health insurance will grow around 15 per cent next year, largely because of marketplace nervousness over whether President Donald Trump will block federal subsidies to insurers, Congress’ nonpartisan fiscal analyst projected Thursday.

The Congressional Budget Office estimate comes as Trump has repeatedly threatened to halt the payments in his drive to dismember President Barack Obama’s health care law.

The agency said 2018 premiums will grow “largely because of short-term market uncertainty _ in particular, insurers’ uncertainty about whether federal funding for certain subsidies that are currently available will continue to be provided.”

It also attributed the projected increase to growing numbers of people living in regions where only one insurer sells policies, therefore facing less competition.

The budget office and insurance industry had previously projected that 2018 premiums would grow an average 20 per cent if Trump actually halts the subsidies.

Obama’s law requires insurers to reduce out-of-pocket costs for lower-earning customers and mandates that the government reimburse them. It costs about $7 billion annually.

A federal court has ruled Congress didn’t authorize the expenditures, but the subsidies have continued.

Sens. Lamar Alexander, R-Tenn., and Patty Murray, D-Wash., have been trying to craft an agreement continuing the payments for at least a year. In exchange, Alexander wants Democrats to make it easier for states to relax the Obama law’s coverage requirements, which Democrats are resisting.

No single formula for hurricane recovery

By Joyce M. Rosenberg



There’s no single formula for a small business to recover from a hurricane or other natural disaster. Many variables determine how well a company can rebound, including the severity of the disaster, the extent of the damage, the type of business it is and how well-prepared it was.

Perhaps the most important factor is money: Does a small business have adequate iInsurance and/or cash reserves to pay for cleanup and rebuilding, and, if it’s unable to operate, to pay its expenses? The Federal Emergency Management Agency estimates that 40 per cent of companies fail after a disaster. Businesses are particularly at risk during hurricanes because many can’t afford expensive flood insurance, which is sold separately from standard commercial insurance coverage. Many owners don’t buy it because they believe they’re in an area unlikely to flood.

If a company’s premises were destroyed or heavily damaged to the point where it couldn’t be used, its recovery will be delayed until it can rebuild. If the surrounding area is heavily damaged, it can be hard to hire contractors. Building materials may be scarce because of the soaring demand from homeowners and other businesses.

Manufacturers can have a prolonged recovery if equipment has been damaged water, especially if it is salt water, can destroy machinery or leave it covered in rust. Madelaine Chocolates, located near the ocean in New York City’s Rockaway section, was shut for 10 months after Superstorm Sandy in 2012. When the company reopened, it was able to resume only partial production while more repairs were being done on its equipment.

Another potential issue: Is the disaster area accessible? Floods can damage roads and bridges, and earthquakes like the one that hit the Los Angeles area in 1994 can destroy highways and bridges.

Retailers have more than a cleanup to deal with. If merchandise is ruined, that means lost sales until the place is cleaned up and replacements arrive.

The companies likely to have the easiest transition back are those that made arrangements so they could keep operating. If employees can telecommute and the company uses backup computer systems located miles away, or uses the cloud to store data, they often can keep working. A bank in Vermont operated out of a trailer for seven months while the branch was rebuilt following Tropical Storm Irene in 2011.

The flooding caused by Hurricane Katrina in New Orleans and its suburbs left many small businesses unable to operate for weeks or months because employees who had evacuated had lost their homes and could not return to the area. Stores, restaurants and other businesses that weren’t damaged, including those in the city’s famed French Quarter, nonetheless had a long recovery because the tourism industry was affected for years after Katrina.


There’s plenty of information online to help business owners get their companies ready for a hurricane or other disaster. They can learn how to create a long-term plan, or what they’d need to do in a hurry.

In short, experts on disaster prep say a company’s first priority should be ensuring that employees are safe and can be located when the danger has passed. Business information should be protected  ideally backed up online with a company a long distance away from the disaster area. Any computer equipment that can be removed from the premises should be, and taken to a safe area.

Worst case scenario not happening and insurance sector soars

NEW YORK _ Though damage from Hurricane Irma is extensive, property insurers are breathing a sigh of relief with the storm nowhere near as catastrophic as many had feared.

Shares in insurance companies that had been hammered in the days leading up to the storm are surging Monday, the first day of trading since the hurricane was downgraded to a tropical storm.

Particularly strong are companies with a strong presence in Florida, like Federated National Holding, HCI and Heritage Insurance.

Citi analyst James Naklicki is estimating U.S. insured loses to be about $20 billion, with totals reaching up to $50 billion. A direct hit to Miami, he says, could have meant up to $150 billion in costs.

Larger insurers like Travelers, Allstate and Progressive are also rising.

Losses for insurers and banks lead US stocks lower

By Alex Veiga And Marley Jay


U.S. stocks are mixed Thursday as steep losses for banks and insurance companies are countered by gains in health care and technology companies. Banks are tumbling with bond yields, and insurance companies are falling as investors weighed the prospects of big losses caused by Hurricane Irma, which is projected to hit Florida this weekend.

KEEPING SCORE: The Standard & Poor’s 500 index fell 2 points, or 0.1 per cent, to 2,462 as of 3:30 p.m. Eastern time. The Dow Jones industrial average slid 57 points, or 0.3 per cent, to 21,750. The Nasdaq composite remained at 6,393. The Russell 2000 index of smaller-company stocks gave up 4 points, or 0.3 per cent, to 1,397.

HURRICANE WATCH: Insurance companies slumped as Hurricane Irma cut a path of devastation across the northern Caribbean, leaving at least 10 dead and thousands homeless. Reinsurance companies fell sharply because many of their policies are for catastrophic losses such as those caused by a hurricane.

XL Group fell $1.90, or 4.9 per cent, to $36.55 while Everest Re slid $15.38, or 6.8 per cent, to $212. Berkshire Hathaway, which owns GEICO and other insurers, slumped $3.37, or 1.9 per cent, to $173.42.

WEATHER OUTLOOK: The economy “is going to suffer a few dents from the storms,” said John DeClue, chief investment officer for U.S. Bank Private Wealth Management. While damage from hurricanes Harvey and Irma may slow the economy for a few months, DeClue said it “is in remarkably good shape,” which will help stocks keep rising.

He also said the effects of the storms will make sure the Federal Reserve moves slowly in raising interest rates.

EUROPE: The European Central Bank raised its economic growth forecast for the region this year. The central bank left its key interest rates and bond-purchase stimulus program unchanged, but investors expect the bank to start reducing its stimulus activity soon as the European economy continues to improve.

The ICE US dollar index, which measures the dollar’s value against a basket of other major currencies, continued to fall and reached its lowest level since January 2015. The euro strengthened to $1.2003 from $1.1913 and the dollar fell to 108.65 yen from 109.37 yen.

That helped technology companies, which make most of their sales overseas. Microsoft added $1.09, or 1.5 per cent, to $74.50. The weaker dollar makes U.S.-made products less expensive in other markets and increases company profits when they are converted back into dollars. That’s one reason tech companies have done far better than any other S&P 500 sector this year.

HEALTH CARE: AbbVie rose $4.70, or 6.1 per cent, to $81.75 and Bristol-Myers gained $2.92, or 4.9 per cent, to $62.79 after the companies reported positive clinical trial results. Eli Lilly climbed $1.07, or 1.3 per cent, to $81.58 after it said it will cut 3,500 jobs, or about 9 per cent of its total jobs. Biotechnology companies also rallied.

BONDS: Bond prices climbed and yields fell to their lowest level since November. The yield on the 10-year Treasury note fell to 2.05 per cent from 2.11 per cent late Wednesday. Lower bond yields are linked to lower rates on loans, and banks took steep losses. Bank of America fell 54 cents, or 2.3 per cent, to $22.88 and U.S. Bancorp lost $1.08, or 2.1 per cent, to $49.83.

MEDIA WOES: Cable providers and cable channel operators fell after Comcast said it expects to lose as many as 150,000 video subscribers in the third quarter and that competition has been unusually intense. It said intense storms also contributed to the problem. Comcast dropped $2.39, or 5.8 per cent, to $38.78.

Meanwhile Disney fell after CEO Bob Iger said the company’s earnings this year will be about the same as the year before, which disappointed analysts. Its stock lost $4.93, or 4.9 per cent, to $96.57.

CHARGE IT: MasterCard rose $3.51, or 2.6 per cent, to $136.40 after the debit and credit card payment processor raised its 2017 revenue forecast and its growth forecast for next year. Rival Visa also jumped $1.26, or 1.2 per cent, to $104.44 and PayPal and eBay also advanced.

BIG JUMP: RH vaulted after the furniture and housewares retailer raised its annual forecasts after a strong second-quarter report. The stock surged $20.61, or 41.7 per cent, to $70.03.

TAKING A SHINE: Gold rose to its highest price in a year as it climbed $11.30 to $1,350.30 an ounce. Silver jumped 21 cents, or 1.2 per cent, to $18.12 an ounce. Copper dipped 1 cent to $3.14 a pound.

ENERGY: Benchmark U.S. crude fell 7 cents to $49.09 a barrel in New York. Brent crude, used to price international oils, gained 29 cents to $54.49 a barrel in London.

Wholesale gasoline lost 1 cent to $1.66 a gallon. Heating oil rose 3 cents to $1.79 a gallon. Natural gas dipped 2 cents to $2.98 per 1,000 cubic feet.

MARKETS OVERSEAS: The German DAX rose 0.7 per cent and the CAC 40 in France gained 0.3 per cent. The British FTSE 100 rose 0.6 per cent. In Asia, Japan’s benchmark Nikkei 225 rose 0.2 per cent, while South Korea’s Kospi jumped 1.1 per cent. Hong Kong’s Hang Seng index gave up early gains to fall 0.3 per cent.

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