Above-average hurricane season could hit insurers, reinsurers
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Fitch Ratings Inc. said Tuesday that while it currently has a stable rating outlook on the property/casualty and global reinsurance sectors, losses from the predicted above-average hurricane season could change that.
Fitch said that although “accelerating property premium rate changes promote improving underlying performance in the sector,” and “industry capital strength remains very strong … a confluence of large events may lead to capital reductions and ratings pressures.”
The report said there is an “elevated” chance of landfall in 2021 given the storm season predictions. Six storms made landfall on the U.S. Atlantic or Gulf Coast at hurricane intensity in 2020, Fitch said, the most since 2005, and Hurricane Laura was the most destructive storm of 2020, causing an estimated $19 billion of damage after making landfall in Louisiana.
The Climate Prediction Center of the National Oceanic and Atmospheric Administration forecast an above-normal Atlantic hurricane season with a likely range of 13 to 20 named storms and London’s Tropical Storm Risk sees 18 named storms in 2021.
The largest writers of commercial lines coverage in Florida are Zurich Insurance Group Ltd., Citizens Property Insurance Corp. of Florida and American International Group Inc., according to Fitch data.
Fitch said that despite the elevated storm predictions, “demand for hurricane-exposed catastrophe bonds has not waned.” The report said sixteen catastrophe bonds issued under SEC rule 144A featuring named storm risk as a trigger totaling nearly $5.2 billion were issued or are expected to be issued since the beginning of 2021, according to the Artemis Deal Directory.
The report notes that storm coverage in Florida depends largely on available reinsurance. The three largest reinsurers of Florida homeowners risk are the Florida Hurricane Catastrophe Fund, Berkshire Hathaway Inc. and Lloyd’s of London, according to Fitch.
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