Reinsurers Exposed to Hurricanes Harvey and Irma to See Capital Strains

Re-insurers with disproportionate combined exposures to hurricanes Irma and Harvey could wind up seeing losses at levels that could strain capital and pressure their credit ratings, according to a new report by Fitch Ratings.

AIR Worldwide currently estimates insured losses from Hurricane Irma between $20 billion and $40 billion in Florida, with an extra $5 billion to $15 billion in the Caribbean, the ratings agency said. Insured losses from Hurricane Harvey range from $10 billion to as high as $30 billion, excluding losses to the National Flood Insurance Program.

“Fitch believes if losses ultimately reach this level, or higher, there may be select (re)insurers with concentrations across each locale that, added together, could adversely affect capital,” analysts said. “However, we believe such cases will not become evident until (re)insurers provide their own specific loss experience.”

Also, Fitch said its ratings coverage will not include small Florida specialist insurers with approximately 60% market share in Florida homeowners’ insurance, which will yield most losses to reinsurers. “Hurricane Irma will be the first notable test of these groups' underwriting policies, claims-handling capabilities, reinsurance programs, capital strength and overall risk management,” the ratings agency said.

– Nicholas Stern, managing editor

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