Irma may be a simpler event than Harvey
Hurricane Irma could possibly be a market-changing event, depending on its path and the level of damage it causes, according to Fitch Ratings.
At its annual press conference at the Monte Carlo Rendez-Vous, Brian Schneider, senior director at Fitch, said it was still very early days in terms of assessing the impact of Irma, but he stressed that it would in all likelihood be a wind event as opposed to a flood event such as Hurricane Harvey.
He said that as things currently stood Irma might be a simpler event than Harvey, with the latter causing losses complicated by the severe flooding.
Schneider said that early estimates of the damage that Irma might cause ranged from $20 to $65 billion. He also pointed out that a lot of the re/insurance for Florida is now covered by Florida specialists, many of which are largely untested by any recent large event of this scale.
Looking at the bigger picture in terms of the global market at this point in 2017, Fitch continues have a negative outlook.
According to Fitch: “Intense market competition and the endurance of alternative capital have both contributed to our belief that a pricing floor has yet to be reached. Continued low investment yields, which Fitch expects to persist, put further strain on reinsurance profitability.
“If pricing or investment yields do not improve some reinsurers may be unable to generate positive operating results should catastrophe losses revert to the long-term historical average.”
Catastrophe losses for the first half of 2017 were below average, which would help the sector to absorb Harvey-related losses in the second half of the year. Scheider added that a large proportion of economic losses will be uninsured or covered by the US Government’s National Flood Insurance programme, as losses were more likely to be flood-related than wind-related.
He believes that there could be further M&A activity across the global reinsurance sector in 2018, adding that some of these deals might involve foreign entities buying into Bermuda as they seek to diversify and develop business outside their core markets and home regions.
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