Traditional reinsurance capital to remain strong in 2019: Fitch

US property/casualty (P/C) insurers are well placed to weather the landfall of a significant storm in the 2019 hurricane season despite experiencing elevated catastrophe losses in the recent years, according to Fitch Ratings.

Fitch expects traditional reinsurance capital to remain strong in 2019 as the sector has demonstrated resilience in the face of significantly higher catastrophe losses in 2017 and 2018.

It noted that the use of alternative capital has continued to grow in 2019 and the catastrophe bond market has seen large national sponsors driving catastrophe bond issuance along with smaller insurers with high risk property exposure expanding their use of insurance-linked securities.

According to the agency, aggregate US industry policyholders' surplus grew by 6.2 percent over the two-year period to $757 billion as of YE 2018 despite significantly higher losses in 2017 and 2018.

The National Oceanic and Atmospheric Administration (NOAA) has predicted average levels of hurricane activity this season.

Fitch, however, noted that determining the number of landfalling events and their intensity remains highly uncertain, making insurers' vigilance in managing catastrophe exposures and risk aggregations essential.

"Given insurers' substantial capital positions, it would likely take a record individual storm loss or a confluence of significant loss events, which could include catastrophes, investment losses and adverse loss reserve experience to impair insurers enough to warrant downgrades," said Chris Grimes, director of insurance at Fitch Ratings.

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