Safeco estimates $78 million in Katrina costs; Rita still being totaled
Seattle Times business reporter
Safeco estimated yesterday that Hurricane Katrina will cost it $78 million in after-tax catastrophe losses.
Its estimate of insured losses before taxes and payments from reinsurance companies totals $170 million, but even that is a small fraction of the $35 billion to $60 billion the hurricane is expected to cost the entire insurance industry.
Safeco is still calculating its potential cost from Hurricane Rita, which struck the Gulf Coast in Texas and Louisiana last weekend. That storm is expected to cost the industry $2.5 billion to $7 billion.
Estimated costs from both hurricanes will appear in Safeco's third-quarter financial results, scheduled for release Oct. 18.
Paul Latta, director of research for McAdams Wright Ragen, said Safeco's Katrina estimate was a little smaller than he expected.
"The Rita loss will probably be about half the Katrina loss, maybe less" for Safeco, he said.
The tone for insurance losses was set Friday, when St. Paul Travelers estimated it would have catastrophe losses of about $800 million from Katrina, far less than some analysts had anticipated.
Part of Safeco's insurance losses will be picked up by reinsurance, policies insurers buy to help pay for large catastrophic events like Katrina.
Safeco has a small share of the market in the states hit by Hurricane Katrina.
It also has a small share of the insurance market in Texas — 1.36 percent — but that state is its third-largest. Texas represents 10.4 percent of Safeco's total premium revenues, behind only California (17 percent) and Washington (11.7 percent).
Estimated insurance losses from the hurricanes do not include flood damage, which is insured by the federal government.
Many people in the areas hit by the hurricanes did not have flood insurance.
Mississippi Attorney General Jim Hood recently sued several insurers, arguing that insurers should have to pay for flood damage, too, because the hurricane caused the flooding. Safeco is not named in the lawsuit, said spokesman Paul Hollie.
Industry advocates say their policies cover water damage caused by winds — for example, rain falling after a roof is blown off — but not damage from rising water.
If insurers were to pay for flood damage now — without having priced it into their policies or set aside reserves for the possibility of flooding — some could go out of business, said Insurance Information Institute spokeswoman Loretta Worters.
In general, analysts don't expect homeowners- and auto-insurance premiums to go up outside the Gulf Coast states hit by the hurricane.
Hollie said that Safeco policyholders in Washington "should not expect to see a rate increase because of what's going on in the Gulf states."
Buyers sought for Redmond site
Safeco is officially seeking buyers for its 46-acre office park in Redmond, which it plans to vacate in a couple of years as it consolidates headquarters employees into its University District locations.
Pacific Real Estate Partners and Secured Capital sent information about the campus to potential buyers, said Safeco spokesman Paul Hollie.
The property, with 730,000 square feet of building space, will be sold in a bidding process.
Melissa Allison: 206-464-3312 or firstname.lastname@example.org
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