Irene losses not a major event for property/casualty insurers: Moody's

Hurricane Irene should not result in major losses for U.S. property/casualty insurers, Moody’s Investors Service Inc. said in an analysis.

The New York-based rating agency noted Wednesday that catastrophe modelers’ estimates of the hurricane’s damage have varied widely. For example, Boston-based AIR Worldwide Corp. on Monday estimated that Irene will cause $3 billion to $6 billion of insured losses. The next day Oakland, Calif.-based EQECAT Inc. estimated insured losses of $1.5 billion to $2.8 billion.

Unique characteristics

“Although wind speeds and hurricane intensity were less than initially expected, a number of unique characteristics, such as the high levels of inland flooding, extensive power outages, and the very wide dispersion of the storm combine to create a high degree of uncertainty in terms of early loss estimates,” Paul Bauer, a Moody’s analyst, said in a statement.

“However, once companies begin to report their own internal estimates based on more accurate claims data, we expect that the hurricane will not prove to be a major capital or credit event for the (property/casualty) industry,” he said. Moody’s also said it does not believe that losses will trigger reinsurance coverage.

While the volume of claims is likely to be large in comparison with a typical hurricane, claim size will likely be small, Mr. Bauer said.>p>

Still, the losses will be “meaningful” and add pressure to earnings already weakened by earlier catastrophes, which Moody’s said drove down insurer profits in the second quarter.