Rates for commercial, auto and homeowners insurance will fall in most areas of the United States this year but will continue to rise in storm-prone coastal areas, an insurance industry group said on Monday.
The industry-sponsored Insurance Information Institute said property and casualty insurers had such a good year in 2006, when no hurricanes hit the United States, that they had built up combined reserves by $55.7 billion.
"Insurers took advantage of last year's respite to fix the roof while the sun was shining," institute President Robert Hartwig said in an interview.
The industry now has an overall reserve of $481.5 billion, up from $425.8 billion at the end of 2005, Hartwig said, although he added that reserves were not as big a defense against major disasters as they might appear.
A single storm such as 2005's Hurricane Katrina could cause up to $100 billion of damage if it hits a major city, he said.
Storm losses in 2004 and 2005 combined came to more than $80 billion.
A single terrorist attack on New York City could wipe out the entire reserve and individual companies could be bankrupted by an event causing far less damage, Hartwig said.
But he said commercial rates for businesses were expected to drop by 5 percent to 6 percent in 2007 compared with 2006.
Auto rates would also decline, as would homeowners insurance except in storm-prone areas such as Florida.
Insurers are bolstering reserves in part because weather forecasters expect above-average hurricane seasons over the next 15-20 years.
In addition, the buildup in coastal areas is increasing the potential risk from hurricanes, Hartwig said.
Rating agencies are also demanding that insurers keep more capital in reserve in case of a disaster.
"On average companies with exposure to catastrophes need 20 percent more capital," said Matt Mosher, a vice president with A.M. Best Co., which rates the insurers.