Bulk of recent cat losses to be borne by insurers
Recent natural catastrophes are likely to have only limited impact on reinsurers as the bulk of the losses will be borne by primary insurers, according to S&P Global Ratings.
Tropical storm Lane's torrential rainfall caused devastating floods, and was the wettest tropical cyclone on record in Hawaii, according to S&P’s report titled "Tropical Storm Lane And Other Recent Natural Catastrophe Events Are Expected To Have Limited Impact On Re/Insurers".
Modeling agency CoreLogic estimated the total reconstruction costs for hurricane-related flood damages for homes at extreme-to-very high risk was approximately $8 billion. Considering flood-related damage and the overall impact from the storm, it believes the majority of the insured losses likely will be covered by the National Flood Insurance Program (NFIP), which is a federal programme, and also by the primary insurers to the extent the flood is a covered peril, which is not generally the case for homeowners’ policies.
The reinsurers' exposure to the storm should be limited and contained within their third-quarter earnings.
Apart from tropical storm Lane, two other recent notable natural catastrophe events were the unprecedented rainfall that flooded the State of Kerala in India, and the Northern California wildfires, mainly the particularly destructive Carr Fire and the widespread Mendocino Complex Fire.
"We believe the losses from the Hawaiian tropical storm, Kerala floods, and Northern California wildfires will have a limited impact on reinsurers' earnings, as the bulk of these insured losses should be borne by primary insurers and the NFIP (for US flood-related losses)," said S&P Global Ratings credit analyst Saurabh Khasnis.
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