The Probable Effect of an Extreme Hurricane on Texas Catastrophe Plan Insurers

This paper determines a plausible range of insured losses in Texas' coastal counties should an extreme hurricane take the most adverse path from the Gulf of Mexico into the state. It then examines the likely financial impact of such losses on affected insurers. Projected insured lossses in these counties, exclusive of automobile coverages and losses in inland counties, range between $1.059 billion and $1.360 billion. Loss shares are compared with the policyholder surplus of affected insurers, and recommendations are made to strengthen the financial position of these insurers relative to their exposure.