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Irma, Harvey unlikely to trigger widespread rate hikes: Analyst

Posted On: Sep. 13, 2017 10:51 AM CST

Keefe, Bruyette & Woods Inc. said that widespread rate increases are not expected in the wake of hurricanes Irma and Harvey, although those hit with losses may see double-digit hikes as loss estimates began to settle.

“We think consensus estimates are converging on a $20 billion to $30 billion insured loss estimate for Hurricane Harvey, and on a $20 billion to $40 billion U.S. insured loss estimate for Hurricane Irma, plus another $5 billion to $10 billion of insured Caribbean losses,” KBW analysts said in a note Wednesday.

Auto physical damage and commercial/industrial property losses, mostly affecting primary insurers, will comprise much of Harvey’s losses, while Irma’s losses should be more in-line with a “typical” hurricane, the note said.

Despite the near-total absence of company-specific loss estimates, “the combination of Harvey and Irma losses aren’t materially disrupting the market,” KBW analysts said, adding they are keeping a cautious eye on Bermuda reinsurers.

In the absence of additional catastrophe losses, the analysts expect only “modest” property catastrophe reinsurance rate increases for 2018, the note said.

“We agree with most executives’ expectations of double-digit rate increases on loss-affected property catastrophe reinsurance buyers, but expectations of rate increases for other lines — and especially for other geographies — faded right along with Irma’s likely losses. We remain very cautious on the Bermudians,” the analysts said in the note.