Fitch Do Not Expect To Downgrade Reinsurers

September 13, 2017

Based on Fitch Ratings’ initial assessments, most US insurance companies and global reinsurers in their rated universe are “not expected to be downgraded as a result of the combined effects of Hurricanes Irma and Harvey.”

“However, Fitch does not yet dismiss the risk that select [re]insurers with disproportionate combined exposures could ultimately report losses at levels that could strain capital and pressure ratings. Fitch also notes that risks remain from other hurricanes or large near-term catastrophic losses in 2017,” the company said.

“Third-party model estimates from AIR Worldwide currently peg insured losses from Hurricane Irma between $20 billion-$40 billion in Florida, with an additional $5 billion-$15 billion in the Caribbean.

“Insured loss estimates from Hurricane Harvey are varied and range from $10 billion from AIR Worldwide and up to $30 billion from RMS, exclusive of losses attributed to the National Flood Insurance Program.

“In total, the combined high end of estimated losses from both Hurricanes Irma and Harvey is $85 billion. Fitch believes if losses ultimately reach this level, or higher, there may be select [re]insurers with concentrations across each locale that, added together, could adversely affect capital. However, we believe such cases will not become evident until [re]insurers provide their own specific loss experience.

“Fitch believes most rated [re]insurers will be able to withstand combined losses from Hurricanes Irma and Harvey. Still, another large loss occurrence within a short period could lead to more substantial changes in capital causing more broadly negative rating actions for [re]insurers. With roughly two months left in the Atlantic hurricane season the potential for additional storm losses on top of those incurred from Hurricanes Irma and Harvey remains a concern.

“It is important to note overall industry insured loss estimates remain preliminary and subject to change. Fitch will be reviewing company-provided loss estimates relative to our initial expectations as estimates become available in the coming days and weeks. If a company’s loss estimates materially exceeds our expectations or ratings sensitivities, Fitch will review the size of the loss relative to capital and earnings and qualitatively assess whether the over-sized loss indicates some weakness in risk management.”

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