hurricane harvey potential impact on auto...

Aon Benfield Auto Practice Group

Hurricane Harvey Potential Impact on Auto Lines September 5, 2017

Aon Benfield | Auto Practice Group 2

This presentation is designed for

companies interested in learning about

Potential impact of Hurricane Harvey on Auto

Aon Benfield’s Observations, Loss Estimates & Methodologies

Hurricane Harvey Update

Historical Perspective

Aon Benfield’s Observations & Loss Estimate Considerations

Agenda Agenda


Hurricane Harvey Overview

Hurricane Harvey made its first landfall on August 25 at 10:00 PM CDT near Rockport, Texas – Landfall Intensity: 130 mph – Category 4 – Highest recorded storm surge: 9.67 feet at Manchester, TX

August 26-30: Storm essentially stopped its forward motion and prompted historic rainfall and catastrophic flooding across east-central & northeast Texas and southern Louisiana

NOAA has deemed Harvey the worst flooding event in Houston’s history Major wind damage in some spots near the landfall location


Extensive Flooding & Rainfall

Inland Flood Extent Rainfall Accumulations

The flooding from Hurricane Harvey is catastrophic and widespread Impact Forecasting has provided a footprint of the flooding and at this

point no model vendors have come out with tracks or projected loss estimates The number of risks in the footprint are imprecise, but are

estimated to be ~3.4M risks with a total insured value of ~$37B


Harvey Rainfall Accumulations

Source: Weather Prediction Center, 10pm August 30


State Number Of Claims

Payment Total Claim Dollars Claims

Claim $

NY 150,000 $13,000 $1,950,000,000 58.1% 71.8%NJ 60,000 $10,000 $600,000,000 23.3% 22.1%PA 11,000 $4,091 $45,000,000 4.3% 1.7%CT 8,000 $3,750 $30,000,000 3.1% 1.1%VA 4,500 $4,444 $20,000,000 1.7% 0.7%MD 5,500 $2,909 $16,000,000 2.1% 0.6%MA 5,500 $2,727 $15,000,000 2.1% 0.6%OH 4,000 $3,000 $12,000,000 1.6% 0.4%DE 2,000 $3,500 $7,000,000 0.8% 0.3%NH 2,000 $2,500 $5,000,000 0.8% 0.2%NC 1,500 $3,333 $5,000,000 0.6% 0.2%RI 1,000 $3,000 $3,000,000 0.4% 0.1%

WV 1,000 $3,000 $3,000,000 0.4% 0.1%DC 1,000 $2,000 $2,000,000 0.4% 0.1%ME 500 $4,000 $2,000,000 0.2% 0.1%VT 500 $2,000 $1,000,000 0.2% 0.0%All 258,000 $10,527 $2,716,000,000 100.0% 100.0%

Superstorm Sandy produced 250,000auto claims and $2.7B of insured loss

Average claims per vehicle of $10,500

PCS Industry estimate is $18.75B– APD estimate is $2.716B or

14.6% of total Vast majority of APD claims coming

from New York and New Jersey– 94% of claim dollars and 82% of

claims reported PCS average claim payment is

$10,527– Highest claims severity in New

York– Lower severity in peripheral states

PCS Bulletin Cat Code 90 ˗ auto physical damage loss estimate (as of March 23, 2013)

Superstorm Sandy – PCS Industry Loss Estimate

Total PCS Estimate of $18.75B does not include uninsured property, including uninsured publicly owned property and utilities, agricultural, aircraft, ocean marine, including oil drilling platforms and insured under the NFIP or the WYO Flood Program.


Alison and Sandy have by far the highest contribution of auto losses compared to recent major hurricanes

APD Total Dollar loss estimate from Sandy is higher than Katrina, even though the total PCS loss estimates is half the size

Auto Physical Damage Share of Total Loss Historical Hurricane Comparison

Year StormCategory at

Landfall in the U.S. StatesTotal Published

PCS Estimate ($M)Total Auto Phys

Damage Estimate ($M)Auto Losses as

% of Total2001 Tropical Storm Alison Tropical Storm FL, LA, MS, NJ, PA, TX 2,500 538 21.5%2004 Hurricane Charley 4 FL 7,430 280 3.8%

Hurricane Frances 2 FL, GA, NC, NY, SC 4,595 158 3.4%2005 Hurricane Katrina 3 AL, FL, GA, LA, MS, TN 41,100 2,168 5.3%

Hurricane Wilma 3 FL 10,300 750 7.3%Hurricane Gustav 2 AL, AR, LA, MS 2,150 128 6.0%

2008 Hurricane Ike 2 AR, IL, IN, KY, LA, MO, OH, PA, TX

12,500 476 3.8%

2012 Hurricane Sandy 1 CT, DC, DE, MA, MD, ME, NC, NH, NJ, OH, PA, RI,

VA, VT, WV

18,750 2,716 14.5%

Based on most recent PCS Report for corresponding event


Sandy was not a severe wind event, but it was a severe surge event

Many individuals did not evacuate impacted areas – If they did, they may have used public

transportation, leaving vehicles vulnerable – Others may have only driven their primary

vehicle away from storm’s path The flooding of major transportation tunnels

leading into and out of highly populated areas may have also contributed to the exceptionally high auto losses – For example Tropical Storm Allison, a 2001

tropical storm impacting the Houston area, flooded tunnels, several major highways, and parking structures

– APD contribution was 22% of total insured loss for that event

When the event severity is low, auto physical damage tends to be a greater portion of total loss

Auto Loss as a Percent of Total PCS Losses: PCS Events 1998 ˗ 2013

Factors Influencing the Seemingly Large APD Contribution to Loss

APD contribution in Sandy (14.5%) relatively consistent with historical tropical storms

and Category 1 hurricanes

Hurricane Category

0 1 2 3 4

% Auto Loss 13% 12% 6% 5% 7%

# Events 11 8 6 6 5

Source: Aon Benfield Analytics


Historical Post Hurricane/Flooding Loss Ratio Impact

Louisiana up 130 loss ratio points post Katrina

New Jersey & NY up 40 loss ratio points post Sandy

Louisiana up 90 loss ratio points

post Katrina

New Jersey up 20 & NY up 30

loss ratio points post Sandy

P&C Industry – PPAPD Direct Incurred Loss + DCC Ratio

Year Louisiana New Jersey New York

2002 67.8% 38.8% 55.2%

2003 59.4% 40.4% 51.8%

2004 52.6% 37.6% 47.0%

2005 143.4% 39.3% 50.2%

2006 49.8% 42.8% 51.6%

2007 56.1% 49.1% 58.5%

2008 70.5% 50.3% 60.9%

2009 52.8% 51.3% 59.0%

2010 50.5% 54.4% 61.5%

2011 59.1% 61.0% 72.1%

2012 64.3% 80.7% 101.7%

2013 72.7% 53.0% 61.8%

2014 60.0% 58.2% 68.4%

2015 64.4% 58.9% 67.1%

2016 110.6% 59.1% 63.9%

P&C Industry – CAPD Direct Incurred Loss + DCC Ratio

Year Louisiana New Jersey New York

2002 57.2% 55.9% 37.3%

2003 41.7% 46.8% 36.2%

2004 57.1% 47.0% 38.7%

2005 191.3% 46.7% 40.1%

2006 38.5% 50.0% 41.4%

2007 43.2% 52.6% 45.7%

2008 52.4% 57.4% 50.5%

2009 44.4% 53.7% 47.3%

2010 47.3% 65.8% 51.2%

2011 52.0% 85.3% 78.0%

2012 58.8% 128.1% 121.4%

2013 65.8% 74.4% 58.9%

2014 51.8% 60.0% 57.7%

2015 51.6% 60.3% 54.4%

2016 99.5% 61.9% 59.0%


Historical Post Hurricane/Flooding Loss Ratio Impact

Low (PP 20% & C 40%) High (PP 90% & C 130%)

2016

DWP ($M)

2016 Incurred Loss

($M) Loss Ratio Low Estimate

Loss Ratio Total Loss

($M) Increased Loss ($M)

Low Estimate Loss Ratio

Total Loss ($M)

Increased Loss ($M)

TX PPAPD 8,486 6,993 82.4% 102.4% 8,690 1,697 172.4% 14,630 7,637

TX CAPD 741 595 80.3% 120.3% 891 296 210.3% 1,558 963

TX Total APD 9,227 7,588 82.2% 1,993 8,600

Low (PP 20% & C 40%) High (PP 90% & C 130%)

Low range of $2B by applying similar loss ratio spike observed post Sandy

High range of $8.6B by applying similar loss ratio spike observed post Katrina


Majority of Precipitation within Harris County / Houston Metro


Estimated APD Loss – Houston Metro

Total TX PPA Premium ($M) 19,181 Avg PPA Prem in TX ($) 1,620 Total # of vehicles in TX 11,840,010

Total TX Population 28,449,186 Total Houston Population 2,296,224

Houston % of TX 8.07%

# of Vehicles in Houston 955,645 Estimated APD Losses ($M)

% of Vehicles with a Claim Avg. Claim Amount ($) 20% 30% 40% 50%

5,000 957 1,433 1,911 2,389 10,000 1,911 2,867 3,823 4,778 15,000 2,867 4,300 5,734 7,167

ADJUSTED TO INCLUDED COMMERCIAL ̶ Commercial Auto is 8.7% of Total TX Auto Premium.

% of Vehicles with a Claim Avg. Claim Amount 20% 30% 40% 50%

5,000 1,039 1,558 2,078 2,597 10,000 2,078 3,116 4,155 5,194 15,000 3,116 4,675 6,233 7,791

Average Sandy APD Claim for NY was $13K – Reasonable proxy since NY corresponds to highest levels of flooding


Estimated APD Loss – Harris County

Total TX PPA Premium ($M) 19,181 Avg PPA Prem in TX ($) 1,620 Total # of vehicles in TX 11,840,010

Total TX Population 28,449,186

Total Harris Population 4,538,000 Harris % of TX 15.95%

# of Vehicles in Harris 1,888,629 Estimated APD Losses ($M)


5,000 1,889 2,833 3,777 4,722 10,000 3,777 5,666 7,555 9,443 15,000 5,666 8,499 11,332 14,165

ADJUSTED TO INCLUDED COMMERCIAL ̶ Commercial Auto is 8.7% of Total TX Auto Premium.


5,000 2,053 3,079 4,106 5,132 10,000 4,106 6,159 8,212 10,265 15,000 6,159 9,238 12,318 15,397

Average Sandy APD Claim for NY was $13K – Reasonable proxy since NY corresponds to highest levels of flooding


Commercial and Personal Auto Carriers in Texas Insurer CAPD DWP ($000) 2016Y % Market ShareTop 20 TX Commercial Auto CarriersProgressive Insurance Group 86,739.48 11.75%Zurich Insurance Group 63,933.80 8.66%Motors Insurance Corporation 34,423.91 4.66%Travelers Companies Inc. 32,860.60 4.45%State Farm 30,273.58 4.10%Nationwide Mutual Group 29,472.46 3.99%Old Repub International Corp. 28,593.80 3.87%Liberty MHC Inc. 26,733.99 3.62%Berkshire Hathaway Inc. 25,995.39 3.52%AmTrust Financial Services 22,655.49 3.07%Hallmark Financial Services 20,682.66 2.80%Farmers Insurance Group of Cos 18,795.26 2.55%W. R. Berkley Corp. 16,726.54 2.26%United Fire Group Inc. 15,357.41 2.08%QBE Insurance Group Ltd. 14,669.03 1.99%Hartford Financial Services 14,217.47 1.93%American International Group 13,235.27 1.79%Allstate Corp. 13,008.92 1.76%Fairfax Financial Holdings 12,991.74 1.76%Sentry Insurance a Mutual Co. 11,488.05 1.56%All Other TX Commercial Auto Carriers 205,637.24 27.85%Total 738,492.10 100.00%

Insurer PPAPD DWP ($000) 2016Y % Market ShareTop 20 TX Personal Auto CarriersState Farm 1,415,679.33 16.68%Allstate Corp. 1,102,880.43 13.00%Berkshire Hathaway Inc. 931,983.54 10.98%Farmers Insurance Group of Cos 832,207.56 9.81%Progressive Insurance Group 759,095.79 8.95%USAA Insurance Group 709,878.89 8.37%Liberty MHC Inc. 417,857.90 4.92%Texas Farm Bureau Insurance Companies 323,941.59 3.82%Nationwide Mutual Group 221,221.96 2.61%Consolidated Lloyds Insurance Group 205,512.59 2.42%Home State Insurance Grp Inc. 166,808.93 1.97%Old American 122,800.29 1.45%AmTrust Financial Services 118,999.69 1.40%Auto Club Exchange Group 115,049.37 1.36%Germania Mutual Group 95,772.44 1.13%Loya Insurance Group 92,499.04 1.09%MetLife Inc. 86,059.91 1.01%Amica Mutual Insurance Co. 67,729.38 0.80%Alinsco Insurance Co. 56,982.52 0.67%Infinity P&C Corp. 37,830.02 0.45%All Other TX Personal Auto Carriers 605,126.14 7.13%Total 8,485,917.31 100.00%


Industry Reports

https://www.cnbc.com/2017/08/29/a-half-million-flooded-cars-and-trucks-could-be-scrapped.html https://www.reinsurancene.ws/harvey-insured-loss-will-large-geico-exposure-similar-sandy-warren-buffett/ 30th August 2017 - Author: Steve Evans Warren Buffett of reinsurance and investments giant Berkshire Hathaway said today that he expects that the insured loss from hurricane Harvey will be large, but uninsured will eclipse it, while also admitting that his auto insurer Geico could face a similar impact to the one it suffered from superstorm Sandy. “In the case of our particularly company, we write about 10% of the auto insurance in Texas,” he said referring to Berkshire Hathaway’s Geico subsidiary. “If you have comprehensive insurance which covers flood, and about 70% of people who buy auto insurance get that, then you may well have a total loss.” Buffett then went on to explain that Geico could face a loss of the magnitude it saw after superstorm Sandy. “We have about 500,000 cars insured in that area, around 10% of the total, and we don’t know at this point but I wouldn’t be surprised if we had 50,000 losses, and most of them would be total losses,” he said, adding that this would be about the same amount of losses as Geico saw from Sandy. When asked what he thought of insured loss estimates suggesting the re/insurance market could face $10 billion to $20 billion of losses from hurricane Harvey, while the economic loss could be as high as $150 billion, Buffett said “Nobody has too good a feel, but those don’t strike me as silly in any way.”

https://www.cnbc.com/2017/08/29/a-half-million-flooded-cars-and-trucks-could-be-scrapped.html




















Conclusions

Aon Benfield is closely monitoring Harvey and will continue to provide updates

Variables impacting loss are emerging as flooding continues

Auto assumptions will vary due to the mobile nature of the risk – ~500k of impacted vehicles seems reasonable

based on current conditions – ~70% of Auto is Comprehensive, 30% does not

include Auto Physical Damage

$3B to $6B is a reasonable range considering flooding impact observed in Sandy and Katrina

Source: NASA


Contact Information

Randy Stanco Senior Managing Director Aon Benfield Commercial Auto Practice Group +1.212.441.1585 [email protected]

Chris Widowski Director Aon Benfield Commercial Auto Practice Group +1.212.441.1522 [email protected]

Thomas Kenia Senior Managing Director Aon Benfield Analytics Commercial Auto Practice Group +1.212.441.1535 [email protected]

mailto:[email protected]




© Aon Benfield 2017. | All rights reserved.

This document is intended for general information purposes only and should not be construed as advice or opinions on any specific facts or circumstances. The comments in this summary are based upon Aon Benfield’s preliminary analysis of publicly available information. The content of this document is made available on an “as is” basis, without warranty of any kind. Aon Benfield disclaims any legal liability to any person or organization for loss or damage caused by or resulting from any reliance placed on that content. Aon Benfield reserves all rights to the content of this document.

hurricane harvey potential impact on auto...

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