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Insurance rates surge on disasters

Catastrophe damage leads to rate hikes

2011 was a year of natural disasters in the United States, leading home underwriters, such as Allstate Insurance, to raise rates for consumers.

Watching the ratio

A combined ration measures an underwriter’s expenses against the premiums it is paid. A ratio of 100 is break even. For 2011, U.S. insurance companies are projected to have paid out $1.16 for every $1.00 paid to them by homeowners, the fourth consecutive year of high ratios.

Cost per natural disaster in 2011

The total cost for the 2011 events is $55 billion – nowhere near the $160 billion price tag in 2005 ($143.9 billion is attributed to Hurricane Katrina). Though the cost was relatively low, 669 people died in these 2011 weather disasters. Weather-related deaths totaled more than 1,000 for the year.


Half of the year’s billion-dollar events were tornadoes, and with six at the EF5 level, NOAA calls it a record year.  

2012 Outlook: Though conditions can always change, severe weather activity usually ramps up in March and peaks in severity between April and May, then fades during the summer months.

Drought and Fire

From spring to fall, heat and a lack of precipitation caused drought and wildfires in the South. By the end of July, 84 percent of the Southern plains had moderate to exceptional drought.

2012 Outlook: A La Nina pattern will continue through spring and rob precipitation from the southern half of the country. The areas badly affected in 2011 will likely see more droughts this year.

Storms, Flood

Persistent rainfall (nearly 300percent of normal precipitation amounts in the Ohio Valley) paired with malting snow caused historical flooding along the Mississippi, Missouri and Souris rivers. Seven states saw a record wet year.

2012 Outlook: A warmer climate could facilitate a gradual increase in the number of extreme precipitation events and the flooding that results from them.


It was rain, not wind speed, that caused damage last year from Hurricane Irene and Tropical Storm Lee. The Northeast saw extensive flood damage.

The U.S. dodged several tropical storms and hurricanes that passed east of the coast. Wilma in October 2005 was the last major hurricane (Category 3 or greater) to strike the U.S. The National Hurricane Center says this is one of the longest stretches on record without a Category 3 hurricane making landfall.

2012 Outlook: Though it’s too early to determine the conditions that will influence the 2012 season, there has been a recent upswing in tropical storm and hurricane activity since 1995 attributed to natural changes in the sea surface temperature. Scientists say increased activity is likely for several more years.

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