While forecasts are calling for more major storm events in 2013, A.M. Best believes the industry as a whole is well-prepared to address potential catastrophic activity because insurers in the space have continually, actively engaged in risk management and taken action to address the growing frequency of such events.

Last year insurers held comfortable catastrophe loss rates until Superstorm Sandy came along and provided major underwriting losses; forecasts are predicting a similar course of events this year, with fewer named storms and hurricanes anticipated, but more major hurricanes expected.

Through the first quarter of 2013, all segments of the P&C sector (personal, commercial and U.S. reinsurance) had lower catastrophe loss rates than at the same point in 2012. The personal lines segment suffered the largest portion of first-quarter 2013 cat losses; with no major non-U.S. events occurring during the quarter, cat losses in the reinsurance segment were negligible; and the homeowners multiperil line saw the greatest benefit from the quiet cat quarter, as survey respondents reported a 7.6-point improvement in the homeowners loss ratio.

However, the recent EF-5 tornado in Moore, Okla., may have evened those numbers out.

During 2012, there were 19 named storms, 10 hurricanes and two major hurricanes (Category 3 or higher). According to A.M. Best’s collection of forecasts, from organizations such as the National Oceanic and Atmospheric Association and Aon’s Tropical Storm Risk research, 2013 is expected to contain fewer named storms than in 2012 and fewer total hurricanes, but an increased number of major hurricanes. In 2012, only 20 percent of hurricanes were Category 3 or higher, whereas 2013 predictions are for 40 to 50 percent of hurricanes to be Category 3 or higher.

Superstorm Sandy tested the effectiveness of risk management efforts, and A.M. Best asserts that, despite the storm’s impact, the industry’s balance sheet has held up well, with policyholders’ surplus increasing 6.3 percent to a record $598.4 billion as of Dec. 31, 2012.

In addition, many P&C writers are beginning to use data collected from Sandy to revise underwriting practices and implement numerous risk management initiatives to address adjustments to catastrophe models.

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