A.M. Best: Gustav Alone Should Have a Minimal Impact on P/C Market Trends

OLDWICK, N.J.--(Business Wire)--
Despite estimates of $2 to $10 billion of insured losses, A.M.
Best Co. does not expect the impact of Gustav alone to change the
current competitive dynamics facing insurers and reinsurers. Although
the losses are considerable in comparison to the overall premiums
collected for the coverage of the losses incurred, the insurance and
reinsurance markets overall are expected to remain competitive.

The projected losses from Gustav will continue to put pressure on
the huge differential between affordable and actuarially sound primary
insurance prices in hurricane exposed regions. Despite the fact that
Gustav turned out to be a relatively moderate storm when put into
historical context, a $4 billion on-shore incurred loss reflects
approximately 100% of 2007 property catastrophe exposed premiums in
Louisiana. The impact on reinsurance costs in the Gulf region is not
expected to be significant, but the actual impact will play out over
the next few months.

Although the impact from Gustav is not expected to be market
changing, A.M. Best does believe the 2008 hurricane season is
demonstrating the considerable risk that was originally projected for
the season. While the landfall of a category 3 or above hurricane will
hopefully be avoided, the recent increase in activity with Tropical
Storm Hanna, Tropical Storm Ike and Tropical Storm Josephine provides
reason to be concerned with the potential of such an occurrence.

Additionally, an increase in the number of smaller hurricanes
making land-fall, combined with an already high level of catastrophe
losses reported in the first half of 2008, would likely bring a dose
of reality to the competitive property cat markets and stem further
declines in pricing in 2009. A.M. Best expects that reinsurers are
again recognizing that the potential for loss cannot be ignored and
the competitive confidence of some underwriters will wane.

A.M. Best does not expect Gustav to be a solvency event. Those
companies that have a meaningful Louisiana property and Gulf marine
market share will be evaluated to determine the extent of the loss
relative to A.M. Best's loss expectations included in our analysis and
the impact on their financial strength. Often events like Gustav raise
more issues relating to risk management capabilities than solvency
concerns.

Founded in 1899, A.M. Best Company is a global full-service credit
rating organization dedicated to serving the financial and health care
service industries, including insurance companies, banks, hospitals
and health care system providers. For more information, visit
www.ambest.com.

A.M. Best Co.
Analysts:
Richard Attanasio, 908-439-2200, ext. 5432
richard.attanasio@ambest.com
or
Robert DeRose, 908-439-2200, ext. 5453
robert.derose@ambest.com
or
Public Relations:
Jim Peavy, 908-439-2200, ext. 5644
james.peavy@ambest.com
or
Rachelle Morrow, 908-439-2200, ext. 5378
rachelle.morrow@ambest.com

Copyright Business Wire 2008