Yesterday, property and casualty insurer Selective Insurance Group, Inc. ( SIGI - Snapshot Report ) declared a preliminary pre-tax catastrophe loss (cat loss) estimate of $70 million, to be reflected in its third quarter 2011 results. The losses which have been calculated net of reinsurance recoveries mainly emanated from Hurricane Irene and six other catastrophes.

In the previous quarter Selective incurred $38 million in weather related losses almost half of what is expected in this quarter.

Other property and casualty insurers who suffered from bad weather during the third quarter include Assurant Inc. ( ( AIZ - Analyst Report ) ), The Chubb Corp. ( ( CB - Analyst Report ) ), W. R. Berkley Corp. ( ( WRB - Analyst Report ) ) and Tower Group Inc. ( ( TWGP - Analyst Report ) ). While Assurant forecasts a pre-tax cat loss of $80 million to $85 million, Chubb sees a significantly high catastrophe loss of $400 million to $475 million pre-tax. Besides, both Berkley and Tower expect an earnings hit of $50 – $60 million.

According to the Insurance Information Institute, the property and casualty industry was hit hard during the first half of the year, as profitability suffered greatly amid high cat losses. In the third quarter, hurricane Irene along with other catastrophes is estimated to have caused insured losses of $3 billion-$4 billion to the industry.

Year-to-date, weather related losses for the industry are expected to trend above $25 billion, up $14.1 billion compared with the cat losses incurred in first-half 2010 and about thrice the average of $7.7 billion for first-half catastrophe losses during the past ten years.

However, the only silver lining under the circumstances is that the record high losses are gradually hardening commercial lines pricing. Also, the recent market surveys by the CIAB (Council of Insurance Agents and Brokers) and Market Scout have indicated that the moderation of declining commercial lines pricing is accelerating, while select commercial lines pricing is witnessing rate increases in certain lines.

Despite cat losses we expect Selective to report good results as the company is benefiting from favorable pricing in both its business lines, Commercial as well as Personal. Along with improvement in pricing, the company is also witnessing positive audit and endorsement, which indicate an improving economy.