(The following statement was released by the rating agency)
Aug 31- Insured losses brought on by Hurricane Irene are likely to be material, but manageable, for U.S. property & casualty insurers and reinsurance companies, according to Fitch Ratings.
While Irene inflicted serious economic damage, devastation from the storm was less than initially feared. Catastrophe modeler AIR Worldwide has insured loss estimates between $3-$6 billion from Irene, which would place this storm on par with Hurricane Rita in 2005 and Hurricane Hugo in 1989. However, it would pale in comparison to Hurricane Ike in 2008, which was the last hurricane to make landfall in the US.
‘If actual losses from Hurricane Irene come in within current ranges, primary insurers will bear most of the loss,’ said Senior Director Brian Schneider. ‘However, as incurred losses rise, the chances of losses being allocated to the reinsurance industry increase.’
With respect to U.S. (re)insurers, Fitch projects 2011 to be the highest catastrophe loss year since 2008 (the year of Hurricanes Ike and Gustav). This is primarily due to inordinate losses from thunderstorm and tornado losses in the first half of the year. Despite the forecast, Hurricane Irene is not likely to be a game-changer for the sector.
(Re)insurers remain vulnerable to further catastrophe losses in the remaining three months of the Atlantic hurricane season. Sizeable catastrophe losses emerge from additional events may lead to greater ratings vulnerability. ‘Potential rating actions for (re)insurers would depend on the size of the loss relative to capital, options pursued to replenish capital and underwriting prospects going forward’, said Schneider.
From the standpoint of rating actions overall, Fitch does not anticipate material rating changes for any insurers tied solely to losses from Hurricane Irene. ‘Insurers most likely to be affected by the storm include those companies who emphasize homeowners and commercial multiperil property insurance,’ said Schneider. ‘Market share in these lines is concentrated in organizations that tend to have larger capital bases and adequate liquidity.’
Fitch plans to release a more detailed report next week that discusses prospects of insured losses from Hurricane Irene and how they may affect the U.S. P&C and (re)insurance sectors.