Hurricane Florence, which is due to make landfall in North Carolina as a major category 3 storm on Thursday night, is likely to be “an earnings event, not a capital event” for the re/insurance industry, according to analysts at Goldman Sachs.
Hurricane Florence forecast track and path
A report by the company said that it believes exposures across its coverage names are manageable, although reinsurers may have more book value at risk than primary insurers, with Axis and RenaissanceRe most exposed.
A recent reconstructed loss value based on historical precedent and present day exposure by RMS put insured losses from Hurricane Florence in the $10-20 billion range, which Goldman Sachs does not believe will have a material impact on 2019 pricing, as “industry capacity remains robust and surplus levels are well in excess of $20bn.”
Absent any further large scale losses by year-end, analysts said that property catastrophe reinsurance rates are unlikely to come under pressure in 2019 even if losses from Florence are at the upper end of the expected range.
In terms of primary insurers, Goldman Sachs found that Allstate, Travelers, and Hartford Financial Services are most exposed to losses from Hurricane Florence.
The report claimed that Travelers’ exposure stems from a combination of market share of catastrophe exposed business in potentially impacted states, as well as limited reinsurance purchase.
Allstate has the largest catastrophe-exposed market share in the potentially impact states but also has a robust reinsurance program that will likely cap losses at a little over $500 million, according to Goldman Sachs.
Similarly, Hartford Financial Services has significant market share in the exposed areas relative to its book value, but also has a robust reinsurance program.
Current projections show that North Carolina, South Carolina and Virginia will be most impacted by Hurricane Florence, although Goldman Sachs added that overall losses will ultimately be determined by the precise landfall location, path, and rate of wind decay.
