Fitch has warned of potential rating downgrades ahead as global 2017 insured losses for re/insurers reach $100 billion and could rise to $190 billion pretax.
If insured claims reach the upper end of estimates, this year would become the highest on record for single year insured losses.
Hurricane Maria’s devastating impacts in the Caribbean are estimated to have cost the insurance and reinsurance industry up to $85 billion, according to AIR Worldwide.
This comes as re/insurers are still counting the cost from $50 billion in upper-end estimated losses from Hurricane Irma, alongside $25 billion from Hurricane Harvey, $3 billion from Mexico earthquakes, and over $20 billion from other events this year.
Fitch said; “These estimates compare to total statutory capital of the U.S. property casualty industry of over USD700 billion and total global reinsurance capital of approximately USD600 billion.
“The latter figure includes Berkshire Hathaway and alternative capital sources. There is some overlap in the two capital figures.”
The aggregation of losses will likely lead to a capital event for some re/insurers, Fitch said, although risks to solvency are low due to carriers’ strong capital levels.
“We believe there is heightened risk that combined loss concentrations to these events for several (re)insurers will result in a capital decline for full-year 2017” Fitch said, warning that in some cases, this could result in ratings downgrades if not addressed through capital raises or other mitigating actions.
While it’s too early to specify which re/insurers will come out of recent events with disproportionate combined or individual exposures, the rating agency named firms with the largest non-life market shares in Puerto Rico in 2016 as Universal Insurance Group, subsidiaries of Mapfre, S.A., Cooperativa de Seguros Multiples Group, Triple S Group and Caribbean Alliance Ins Co., based on filings with the National Association of Insurance Commissioners.
Larger diversified primary insurers in the U.S. and select global players will report material catastrophic losses, however, no rating actions will be taken until after re/insurers compile their actual loss information.
Firms which see losses significantly exceed their modelled estimates are the most at-risk of rating downgrades, said the agency, as this would indicate weaknesses in risk management processes.
“However, if our analysis of exposure data and modelled estimates, especially for Puerto Rico, highlight individual cases where there is significant risk, we would expect to put such companies’ ratings on Rating Watch until more definitive information is available,” said Fitch.
