The impact of hurricane Michael and the resulting losses faced by the insurance and reinsurance sector should be enough to keep a floor under pricing, according to RLI Corporation’s Chief Operating Officer Craig Kliethermes.
Hurricane Michael struck the Florida Panhandle a deadly blow on October 10th, coming ashore as a major Category 4 storm with wind speeds of up to 155mph.
This made the hurricane one of the strongest to ever hit the region and the strongest to hit the United States since Andrew in 1992.
But overall industry losses are not expected to be particularly significant, with industry loss estimates seemingly suggesting a bill of around $8 billion for the sector. AIR Worldwide estimated insured losses at between $6 billion and $10 billion, while Karen Clarke & Co. said $8 billion, CoreLogic said up to $5 billion., and most recently RMS opted for between $6.8 billion and $10 billion.
But even at these levels, which are significantly below the levels that the 2017 hurricanes cost the industry, it could still be enough to help stem the price decline, according to Kliethermes.
Speaking during the RLI Corporation third-quarter earnings call last week, RLI Insurance President and COO Kliethermes explained that it is still too soon after hurricane Michael for a financial impact discussion.
However, he was happy to discuss the potential effects that hurricane Michael may have on the market.
“From a rate level perspective, we expect that the devastating impact of last week’s hurricane Michael will keep a floor under the current pricing environment,” Kliethermes said. Adding, “From a focus perspective, our number one priority is to help our affected customers get back on their feet as quickly as possible, and those efforts are already underway.”
The generally held opinion in the industry is that there remains ample capital strength among traditional insurers and reinsurers to absorb hurricane Michael’s losses, while the ILS market is expected to take a smaller share.
While the hurricane is not expected to create any significant upwards pressure on reinsurance pricing, it seems the market hopes to see the storm being a sufficiently large enough loss to underpin pricing and prevent further declines.
