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9 October 2018Insurance

Reinsurance to protect Florida P&C players from hurricane Michael

Insurers and reinsurers exposed to hurricane Michael in Florida are likely to be only modestly impacted by hurricane Michael because of their typically high reinsurance protection, according to KBW.

Florida's fragmented personal property market is typically heavily reinsured at relatively low attachment points, KBW analyst Meyer Shields said.

Although KBW analysts don't have a credible estimate yet, Shields expects the industry's total insured losses to be manageable, with little impact on property reinsurance pricing trends.

Michael is currently a category 1 hurricane but may reach category three strength before it arrives in Florida, possibly on Wednesday, and is then expected to move up the US East Coast.

With 57,002 homes at risk of coastal storm surge totalling over $13 billion in reconstruction cost value (RCVs) across Florida, Michael is a fast-moving storm, data provider CoreLogic said. Hurricane-driven storm surge can cause significant property damage when high winds and low pressure cause water to amass inside the storm, releasing a powerful rush over land when the hurricane moves onshore, CoreLogic added.

Among the most exposed insurers in Florida as measured by market share (direct premium written) in business lines typically affected by severe storms is Universal Insurance Holdings Group (9.3%), State Farm Group (6.6%) and Tower Hill Group (6.5%), according to AM Best.

In Alabama, the insurers potentially most exposed by market share to hurricane Michael are State Farm Group (28.6%), Alfa Insurance Group (14.0%) and Allstate Insurance Group (11.4%).

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More on this story

11 October 2018   Hurricane Michael made landfall as a Category 4 hurricane along the Florida Panhandle coast yesterday (Oct. 10) and is expected to have caused damage from wind and storm surge in the range of $2 billion to $4.5 billion, according to CoreLogic estimates.
11 October 2018   Reinsurers are likely to bear the brunt of the losses caused by hurricane Michael, KBW's Meyer Shields suggested in a research note.
16 October 2018   Industry insured losses resulting from hurricane Michael’s winds and storm surge will range from $6 billion to $10 billion, according to estimates by catastrophe risk modelling firm AIR Worldwide.