Insurers Taking El Nino In Stride

El Nino may be wreaking havoc on U.S. coastal properties and the federal program that insures them, but it shouldn’t be much of a storm for private insurance companies, the chairman of Allstate Corp. said Wednesday.

Jerry D. Choate, said Allstate and many other private insurers will escape El Nino claims because they do not cover flood damage, which accounts for most El Nino-related claims.

Those same companies are getting a benefit from El Nino, which has warmed the air as far away as the Midwest and East Coast, reducing claims for winter storm damage, Choate said.

“We’ll get some claims out of it, but it won’t be major,” Choate said of El Nino.

El Nino is expected to cause heavy rainfall this year in the southern third of the nation, according to the National Weather Service. But that may cause less damage than snowstorms would, said Choate, who heads the nation’s second-largest property and casualty insurance company.

Flooding and any resulting mudslides are insured through federal programs. But only 20 percent of properties in the nation’s flood plains are actually insured for floods, said Loretta Worters, a spokeswoman for the Insurance Information Institute, an industry trade group.

That fact has enabled private insurers to escape nearly all claims tied to El Nino, which is expected to cause $1 billion in earthslide damage alone in California.

While it is difficult to directly correlate El Nino to improved insurance company performance, some data look promising in this regard, said Christopher Guidette, a spokesman for the Insurance Services Office Inc., an industry organization.

Insurers had $2.6 billion in catastrophe losses last year, less than any year in the previous decade, Guidette said. And there were fewer hurricanes - possibly because of El Nino - than there had been in any of the last eight or nine years, Guidette said.

It isn’t clear sailing yet for private insurers. Increased rain may bring wind damage, which is covered in most homeowner policies, Choate said. And although it is shrinking, El Nino still could cause severe problems, the National Weather Service has warned.