Analysts at investment bank Berenberg have said they remain confident that Hurricane Ian, currently bearing down on the Florida coast, will remain an earnings event for insurers and reinsurers, rather than a balance sheet event.
Hurricane Ian over the Gulf of Mexico at 4:26pm on September 27th. Source: NOAA via AP
The forecast path for Hurricane Ian, which is now a major Category 4 storm with maximum sustained winds of 155 mph, has shifted south overnight, with a landfall now expected to be somewhere between Fort Myers and Sarasota.
Current insured loss estimates for the storm mostly range between $25 billion to $35 billion, depending on the strength and precise location of the hurricane at landfall, as well as the impact of any potential storm surge.
Berenberg also highlights scenarios in which losses could exceed $60 billion, but assured that most scenarios would only constitute an earnings event for the re/insurance industry.
Additionally, analysts note that many re/insurers have been actively reducing their footprint in Florida property lines this year, meaning many industry estimates could be overstating losses from Hurricane Ian, due on outdated market share figures.
Based on the latest AM Best data, the state-backed Florida Hurricane Catastrophe Fund (FHCF) holds the largest share of the Florida specialist personal property reinsurance market at 10%.
Behind this, in the private reinsurance sector, Berkshire Hathaway is believed to be the next most exposed with a market share of 8.3%, followed by Munich Re at 6.4%, Swiss Re at 5.1%, Everest Re at 4.1% and Allianz at 3.4%. Overall, the top 10 reinsurers by market share account for a significant 48.1% of the Florida specialist personal property market.
That said, Berenberg stresses that market share will not necessarily track proportionally to exposure, as this data does not differentiate between the type of reinsurance offered.
For instance, quota shares can have a variety of structures with features to limit downside risk, for example excluding named storm coverage, non-named storm sub-limits, or aggregate cat limits.
Similarly in the catastrophe excess of loss market, there has been a similar focus on selective risk appetites and again individual companies have very different preferences with regards to which layers they are willing to be exposed to.
Berenberg also anticipates that any large losses in Florida this year will further add to the pricing rhetoric around rising rates, while a demand surge from a large loss could lead to a deterioration in current inflationary trends.
Hurricane Ian hit Cuba yesterday with winds of up to 125 mph, damaging the country’s electricity grid which caused a blackout for the entire island. It’s been reported in the mainstream media that two people have lost their lives, so far, and buildings and infrastructure has been damaged nationwide.
