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State Farm and Nationwide lead Carolinas cat risk market share

State Farm, Nationwide, USAA and Allstate are the leaders in terms of market share for cat-exposed lines of business in the Carolinas, the states most heavily affected by Hurricane Florence, which made landfall in North Carolina on Friday (14 September).

The lines of business considered as catastrophe risk-exposed include allied lines, commercial auto, commercial multi-peril (non-liability), farmowners’ multi-peril, federal flood, fire, homeowners’ multi-peril, inland marine, multiple-peril crop, private passenger auto physical damage, private crop and flood.

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State Farm was the market share leader in the two states combined, with 13.4 percent of direct premiums written in 2017. No other carriers had a market share above 10 percent. Only Nationwide, USAA, Allstate and Liberty Mutual held over more than 5 percent of premiums each.

Looking at North Carolina and South Carolina combined, the market was relatively concentrated, with the top 10 players responsible for 56.5 percent of direct premiums written in the lines of business mentioned above.

Separately, the two states were even more concentrated in terms of market share. In North Carolina, the largest 10 writers of cat risk business were responsible for 62.8 percent of the market in 2017, with State Farm and Nationwide each holding around 10 percent. North Carolina Farm Bureau Insurance wrote 9.0 percent of premiums. 

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In South Carolina, State Farm was again first and held a slightly larger position than in the neighbouring state, with a market share of 16.2 percent. In terms of market concentration, the top 10 carriers in the state wrote 62.7 percent of cat risk-exposed business last year (see chart below).

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Insured losses were initially pegged at $10bn when Florence was expected to hit as a Category 4 hurricane, but the estimations nearly halved as the storm decreased in magnitude.

Notably, Florence is likely to be more of a flood-driven rather than a wind-driven event. This makes catastrophe forecasters’ models a less useful guide than with a pure wind loss, but initial ranges from modellers were pointing to storm and wind-related claims of around $3bn-$4bn.

For example, CoreLogic predicted that Florence will cause between $3bn and $5bn in insured wind and storm-surge losses, with North Carolina absorbing most of the losses.

Based on these estimations and market share data, we calculated implied gross losses for the market leaders in the two states based on strict market shares, and prior to any reinsurance benefit.

Of course, actual losses will depend on geographic exposures within the state, as well as which lines of businesses are most impacted.

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