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April 1 (The following statement was released by the rating agency)
Global reinsurers will report solid underwriting profitability for the first quarter of 2014 as catastrophe loss events were limited, Fitch Ratings says. As such, reinsurers' results are expected to be in line with those reported in 2013, as the industry has not suffered a significant catastrophe loss event since Hurricane Sandy in the fourth quarter of 2012.
The largest insured natural catastrophe losses for the period were from severe winter storms in the US and flooding and winter storms in the UK. We believe that losses from these events will be manageable for the (re)insurance industry, especially as the most exposed firms are typically large, well-diversified operators with the ability to offset losses through other profitable lines and strong capital.
Reinsurers will only have to shoulder a minority of the losses, as these events were not costly enough to trigger insurers' excess of loss property catastrophe reinsurance treaties. Losses for reinsurers will generally be limited to facultative, per risk and pro rata quota share reinsurance treaties. In the case of the US, this was partly due to increased retentions by primary insurance companies over the last few years, as improved capital positions have allowed insurers to retain more risk.
The Insurance Information Institute reported that winter 2014 could rank among the top five in US winter-storm insured losses since 1980. January losses alone totalled USD1.5bn as a polar vortex driven by an unusually strong jet stream pushed temperatures below freezing in every state of the country, a rare event.
The significant snowfall and record severe cold resulted in increased claims for both personal and commercial lines insurers. These came from roof collapses, power failures, frozen and burst pipes, auto accidents and business interruption. Once the insured losses from all the 2014 winter storms are aggregated, it will push the total for the year above the USD2bn of losses registered from winter events in 2013.
The Association of British Insurers estimated UK flood insured losses will cost the industry GBP1.1bn, due to an historic amount of rainfall that was also the result of the abnormal strength of the jet stream. While the wind strength of individual storms was not exceptional when compared with others in recent years, the rapid succession of storms and accumulated rainfall was. According to the Met Office, England and Wales recorded the wettest winter since records began in 1766. As a result, insurers have received a significant amount of flood and storm damage claims for losses to homeowners, businesses and vehicles, but these are considered to be manageable.