Hurricane Irma insured losses are estimated to amount to $25 – $50 billion, causing near-term earnings reduction for exposed firms but no expected rating weakening, according to Fitch Ratings.
The rating agency said that while carriers remain well-capitalised with sufficient balance sheets to handle claims from Irma and Harvey, capacity could come under threat if further large-scale catastrophic events add a further blow to returns this hurricane season.
Florida property specialists hold approximately 64% of the Florida homeowners insurance market share, having grown significantly by taking over books of business previously covered by state sponsored insurer, Citizens Property Insurance.
For most of these firms, Fitch said, Irma is the first major hurricane landfall in their history.
Chris Grimes, Director at Fitch, said; “Re-insurers will bear a large portion of losses from Irma, but the reinsurance market is well equipped to handle substantial hurricane losses in part due to a lack of major hurricane landfalls in the 11 years before Irma.
“As Irma losses will be less than previously feared, the majority are unlikely to have losses from the event that exceed catastrophe reinsurance program limits.”
Most hurricane related losses are expected to be covered by the carriers’ reinsurance and retrospective provisions.
Fitch explained that with the alternative reinsurance capital market playing an active part in Florida, property risk losses will also be passed on to capital market investors.
Swiss Re Capital Markets estimates about 45% of outstanding cat bonds are exposed to Florida wind events and over 60% are exposed to broader U.S. wind risks.
Florida property risk is often transferred to the insurance-linked securities (ILS) market through multiple vehicles including catastrophe bonds, collateralized reinsurance, sidecars, industry loss warranties (ILW), and hedge fund-supported reinsurers.
