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Allstate Among Insurers Pressured by ‘Frankenstorm’

October 26, 2012

Allstate Among Property Insurers Pressured by 'Frankenstorm'

In this handout satellite image provided by National Oceanic and Atmospheric Administration (NOAA), Hurricane Sandy churns off the coast of Florida in the Atlantic Ocean on Oct. 26. Source: NOAA/Getty Images

Allstate Corp. (ALL:US), Travelers Cos. and Chubb Corp. (CB:US) fell as a weather system that’s expected to form from Hurricane Sandy threatens to lash the U.S. East Coast, knock out power and cause travel delays.

Allstate, the second-largest U.S. home and auto insurer, fell 0.9 percent to $40.15 at 4 p.m. in New York. Travelers slipped 0.8 percent and Chubb, an insurer of high-end homes, sank 1.8 percent.

The system, dubbed “Frankenstorm” by the National Weather Service, may increase claims costs for property insurers, which have benefited this year from lower catastrophe costs than in 2011. Insured losses may be $5 billion in the U.S., with the biggest portion in Pennsylvania, according to estimates from Kinetic Analysis Corp. and compiled by Bloomberg.

“Most of the affected areas are pretty population-dense,” Mark Dwelle, an analyst at RBC Capital Markets, said in a phone interview today. “There aren’t a lot of safe landing spots.”

The National Hurricane Center track for the system has it going ashore just south of the Delaware Bay on Oct. 30 and moving northwest between Baltimore and Wilmington, Delaware. The path may change before landfall, the center said. As much as 10 inches of rain may fall on parts of the Northeast, with the heaviest rain to the north of the storm’s track.

Sandy is likely to cause damage similar to Hurricane Irene, which lashed the East Coast last year, FBR Capital Markets’ Randy Binner wrote in a research note today. The losses are unlikely to reach reinsurance limits, so firms including Allstate, Hartford Financial Services Group Inc. (HIG:US) and Travelers will bear the costs, he said.

Capital Capacity

“This level of event is notable for earnings impacts to exposed insurers, but it is not a large event in terms of industry capital capacity,” Binner wrote.

Irene cost insurers $4.3 billion, according to data compiled by the Insurance Information Institute. Standard homeowners’ policies protect against wind damage, while losses from flooding aren’t covered, the trade group said.

Mark Schussel, a spokesman for Warren, New Jersey-based Chubb, Travelers’ Jennifer Wislocki and Hartford’s Thomas Hambrick declined to comment on storm losses. April Eaton, a spokeswoman for Allstate, said it’s too early to estimate claims costs.

As of 2 p.m. New York time, Sandy’s top winds fell to 75 miles (121 kilometers) per hour, down from 100 mph earlier, according to the hurricane center in Miami. It was 30 miles north-northeast of Great Abaco Island in the Bahamas and 430 miles south-southeast of Charleston, South Carolina, moving northwest at 7 mph.

State Farm

Policyholder-owned State Farm Mutual Automobile Insurance Co., the largest U.S. auto and home insurer, sold the most coverage exposed to storm damage in the states that may be affected by the weather system, according to a report today from JPMorgan Chase & Co. Northbrook, Illinois-based Allstate was the second-largest, followed by Travelers. Chubb was ninth, according to the report.

Property-casualty companies have record levels of capital and will probably be able to continue to generate more “even if the industry experiences substantial catastrophic losses” in the fourth quarter, JPMorgan said in the report.

“It’s not a crippling storm,” Ed Noonan, chief executive officer of Bermuda-based reinsurer Validus Holdings Ltd. (VR:US), said in an interview today. “It’s just it’s unusual to have a storm of this size this late in the year.”

To contact the reporters on this story: Noah Buhayar in New York at; Zachary Tracer in New York at

To contact the editor responsible for this story: Dan Kraut at

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