Andrew may cost US insurer dollars 1bn

Click to follow
The Independent Online
THE devastation caused by Hurricane Andrew will push Chicago- based Sears Roebuck into the red for the third quarter, with its insurance arm expecting dollars 1bn worth of claims arising from the disaster.

Allstate Insurance, a wholly-owned unit of Sears, said yesterday that it expected 165,000 policyholder claims arising from hurricane damage.

This would have an after-tax impact of dollars 700m on Allstate earnings, and in turn cause Sears to register a loss probably amounting to several hundred million dollars for the quarter.

However, Sears, which recorded net profits of dollars 1.28bn for 1991, is well placed to withstand the losses, which are likely to make this the worst year to date for the American insurance industry.

Allstate had offset some of its risk in the reinsurance markets, and a spokesman for the company said this accounted for about dollars 170m of the difference between the dollars 1bn claims figure and the impact on earnings, with the balance due to tax considerations.

Also facing huge losses as a result of Andrew is the State Farm Group, based in Illinois. In a preliminary estimate State Farm said it faced claims of about dollars 750m, though this number is expected to grow.

State Farm did not utilise the reinsurance markets, though this makes it an exception within the insurance industry.

Other insurers' estimates of likely claims include dollars 40m at Nationwide, based in Columbus, Ohio, dollars 50m at Geico of Washington DC, and dollars 70m at Travelers Corp, based in Hartford, Connecticut.

Allstate is active throughout the US and has 2,000 employees in Florida and Louisiana, the two states worst affected by the hurricane.

The company has sent in an additional 1,100 staff from out of state in order to process the huge volume of claims. Most of the claims are from individual policyholders for cars, homes and household goods.

Total insurance industry claims for Florida alone resulting from Hurricane Andrew are expected to top dollars 7.3bn.

This compares with dollars 4.2bn resulting from Hurricane Hugo in September 1989.

Comments