Reinsurers 'far more exposed' to Hurricane Irma than primary insurers

Private reinsurers should be far more exposed to a Hurricane Irma loss event than the primary insurers, according to a Sept. 5 Credit Suisse equity research note.

This would be the opposite of what happened with Hurricane Harvey, where primary insurers were hit harder.

Some very sizeable insured loss events are within the subset of possible projected Irma paths, the analysts noted.

Irma is a potentially catastrophic category 5 hurricane and will bring life-threatening wind, storm surge, and rainfall hazards to portions of the northern Leeward Islands, including the Virgin Islands and Puerto Rico, according to the US National Hurricane Center.

Irma is travelling at speeds of 185mph, only 5mph below the all-time record Atlantic hurricane wind speed of 190mph. This potentially devastating hurricane could directly impact southern Florida early next week. The chance of direct impacts from Irma from wind, storm surge, and rainfall continues to increase in the Florida Keys and portions of the Florida Peninsula.

The standard private primary insurers have shied away from writing both commercial property and homeowners in Florida over the last fifteen years, analysts Ryan Tunis and Crystal Lu wrote.

The analysts said that cat models generally agree that a 1- in-100yr Florida Hurricane event is equivalent to a cat 4 directly striking Miami and would correspond to a $125 billion insured loss event. The odds of that event are clearly currently much greater than 1 in 100 given the path and size of the storm, according to the research note.

As long as there remains a reasonably high probability of a South Florida landfall, the range of losses will be subject to extreme variability. The best case scenario for the P&C stocks would be for landfall projections to continue to move southwest which would likely bring the subset of loss events back into the sub $50 billion range.

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