AFTER THE RIOT: THE SEARCH FOR ANSWERS : Insurers to Pay Riot Claims
Riot-related losses so far have not threatened any insurance companies with failure, state officials said, but at least two smaller firms said that claims have exceeded their reinsurance coverage.
Unico American Corp. of Woodland Hills announced that its Crusader Insurance Co. subsidiary had logged 218 claims as of Tuesday. Although it did not have a dollar estimate, Unico said that claims “have exceeded the dollar amount of reinsurance protection available for this event” and that losses will be “very material.”
Reinsurance is a mechanism by which insurers spread risk: It is essentially insurance for an insurer to reduce its liability. When such losses exceed the amount of reinsurance coverage, they deplete the firm’s loss-reserve fund and reduce its capital.
Crusader insures numerous small retail businesses in areas affected by the rioting, which insurance officials have called the most costly civil disturbance in U.S history.
Unico’s stock dropped 50 cents, to a 52-week low of $3.125, in over-the-counter trading Wednesday. In one week, the stock has lost 84% of its value.
Aim Insurance Co. of Anaheim, which insures many shops--especially video stores--in the worst-hit neighborhoods, estimated that its claims will total $2.6 million or perhaps a little higher. That amount exceeds Aim’s reinsurance coverage, but Vice President Carol Willis said it should not threaten the firm’s solvency.
No industrywide estimate of losses was available Wednesday, but several large firms offered updated information on claims:
* Farmers Insurance Group, which has 60,000 commercial policy holders in greater Los Angeles, said its claims will “exceed $100 million.”
* State Farm Group said it expected 1,000 to 1,500 claims, totaling $30 million to $50 million.
* Allstate Insurance Co: 185 claims, $11.8 million.
* Transamerica Insurance Co.: 66 claims, $11.7 million.
* California Fair Plan: 275 claims, no dollar estimate.
* Fireman’s Fund Insurance Co.: 80 claims, no dollar estimate.
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