State Farm leads home and auto cover in Carolinas

As Hurricane Florence continues to track across the Atlantic, data from SNL has found that State Farm has the biggest market share for both homeowners’ multi-peril and private auto across North Carolina and South Carolina.

Taking the states together, the carrier has a 19.44 percent share for homeowners’ risks and 18.72 percent for private auto, making it potentially the most exposed insurer to losses from Florence.

As with any cat event, the ultimate exposure any one carrier holds is dependent on location and geography, but market share data can serve as a good proxy.

USAA ranks second for homeowners’ policies, with an 8.29 percent stake across the two states, followed by Nationwide (8.26 percent), Allstate (7.92 percent) and North Carolina Farm Bureau Insurance (7.52 percent).

In auto, Geico has the second largest market share across the Carolinas, at 11.98 percent. Allstate ranks third with 9.33 percent, followed by Nationwide with 9.20 percent and USAA with 8.18 percent.

State Farm’s share is greater in South Carolina, where it has a 21.2 percent market share for homeowners’ and a 23.88 percent market share for auto.

State Farm, USAA and Nationwide all run retentions in the hundreds of millions of dollars, meaning Florence may not cause losses to reinsurers. However, the cat programmes for USAA and Nationwide did attach after last year’s California wildfires.

As of midday UK time on Monday, Florence was tracking across the Atlantic between Bermuda and the Bahamas as a Category 2 storm.

The US National Hurricane Center (NHC) predicts the storm will make landfall in the Carolinas at 02:00 local time on Friday. Long-range forecasts from Tropical Storm Risk indicate the storm will make landfall in the vicinity of Wilmington, North Carolina, at a strength of Category 4.

Forecasters at JLT Re have predicted that after making landfall, Florence will cause prolific rainfall in a region which has already been saturated over the past two months.

Strong winds in conjunction with one to two feet of rain from Florence will cause major flooding and increased risk of treefall, the broker said on Monday.  

Sources speaking to this publication during the Monte Carlo Rendez-Vous suggested that carriers have been enquiring with brokers about securing live cat trades, but most are unwilling to pay the prices currently quoted by reinsurers.

Industry loss warranties are being quoted at around 40-50 percent rate on line for a $20bn industry loss, and reinsurers are reluctant to provide cover for much cheaper.

At the time of going to press, this publication had been unable to verify any live cat deals that had traded in the last 24 hours.

Both the Carolinas have a residual insurer – or insurer of last resort – for homeowners who are unable to secure insurance in the private market.

The North Carolina Joint Underwriting Association and the North Carolina Insurance Underwriting Association have previously sponsored a cat bond called Tar Heel Re, which provided them with aggregate cover, but this expired in 2016.

Information on any cat reinsurance programme the residual insurers buys is not publicly disclosed on its website.

The South Carolina Wind and Hail Underwriting Association holds a 2018 cat programme which offers a total $740mn of cover above a $10mn retention. The stack will provide cover for up to a 1-in-250-year wind event. 

The Lloyd’s market is also said to have major exposure to South Carolina beachfront property risk, written on an excess and surplus lines basis.

Major historical hurricanes that have struck the Carolinas have caused average damages of $31.9bn, according to the Icat damage estimator.

With only a few such storms having impacted the North Carolina and South Carolina coasts in the historical period covered by the Icat tool, the most recent parallel is 1989 storm Hugo, which caused total economic losses of $27.4bn in 2018 dollars.

In a recent update the NHC said the storm was about 625 miles (1,005 km) south east of Bermuda, with maximum sustained wind speeds of 105 mph (165 km/h).