Although some uncertainty regarding the intensity of hurricane Irma and the storms track as it approaches Florida, A.M. Best warns that the majority of reinsurers will incur losses from the event.
Irma, currently a Category 4 storm, which has already battered parts of the Caribbean and is expected to maintain its intensity as it makes a Florida, U.S. landfall in the early hours of Sunday morning, has the potential to result in huge economic and insured losses.
A re/insurance industry loss of $75 billion or more, is likely to see the global reinsurance sector record “a meaningful underwriting loss for the full year and experience a modest loss of capital,” says A.M. Best, in a recent industry note on the potential impact of Irma on the global P&C sector.
Should Irma’s path stay in line with current forecasts, A.M. Best expects the commercial insurance segment to experience a substantial volume of claims, both for direct property losses and also business interruption losses.
“A.M. Best anticipates that third-quarter and annual earnings for most public commercial segment companies will be adversely affected by the one-two punch of Harvey and Irma,” says the ratings agency.
So it looks like Irma could be a significant event for insurers, reinsurers, and also the interests of some alternative reinsurance investors, via their participation in the retrocession market, the collateralised reinsurance sector and also the catastrophe bond space.
The potential for property losses in Florida appears to be increasingly likely, with evacuations underway. Alongside the anticipated wind damage from Irma, the storm is expected to result in a huge storm surge that could drive widespread, and devastating flooding (as seen with hurricane Harvey).
A.M. Best, like the rest of the industry will be keeping a close eye on Irma as it maintains its track towards the state of Florida, although only time will tell just how deadly the storm is when hit makes landfall, and whether it becomes the significant re/insurance industry event many expect.
