Sound risk management and strong investment results enabled US general insurers to weather record catastrophe losses last year.

The insurers actually increased their earnings and added to their capital bases, according to the Insurance Services Office (ISO) and the Property Casualty Insurers Association of America.

The US industry’s net income rose 11.7%, or $US4.5 billion ($6 billion), to $US43 billion ($57.6 billion) last year from $US38.5 billion ($51.5 billion) in 2004. Consolidated surplus, or statutory net worth, increased 9.2%, or $US35.8 billion ($47.9 billion), to $US427.1 billion ($572 billion) at the end of last year from $US391.3 billion ($524 billion) at the end of 2004.

Net income and surplus increased even though property losses due to catastrophes rose to a record $US57.7 billion ($77.2 billion) – more than double the $US27.5 billion ($36.8 billion) in direct insured property losses due to catastrophes in 2004.

But ISO Assistant VP Michael Murray says countrywide data for all lines often masks significant problems in specific markets and locations.

“For example, before reinsurance recoveries and excluding losses covered by residual market mechanisms, the hurricanes of 2005 caused $US24.7 billion ($36 billion) in insured losses to residential and commercial property in Louisiana — $US3.1 billion ($4 billion) more than all the premiums insurers charged for property insurance in the state during the 23 years from 1982 to 2004.”

The severe weather doesn’t show any signs of easing, with experts predicting an 80% likelihood of a category 3-5 hurricane hitting the US this year.

But Mr Murray says the industry has a greater ability to spread reinsurance risk globally – including through the Lloyd’s market.

“ISO’s analysis indicates foreign insurers and reinsurers will ultimately cover $US14-19 billion ($18.7-25.4 billion) of the losses from last year’s catastrophes,” he said. “But the cost of reinsurance for US property risks in catastrophe-prone areas is now rising sharply, making it more expensive for primary insurers to provide coverage.”