Fitch Do Not Expect To Downgrade Reinsurers

September 13, 2017 | 0 Comments

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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