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No ratings action expected in wake of hurricanes: A.M. Best

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A.M. Best said Tuesday it does not expect any ratings actions after a preliminary review of loss data received from rated insurers in the Caribbean and Puerto Rico affected by hurricanes Maria and Irma.

The Oldwick, N.J.-based rating agency said its briefing released just before Hurricane Maria struck Puerto Rico had raised potential concerns for insurers in the Caribbean and Puerto Rico as the region prepared to experience its second major hurricane in two weeks, A.M. Best said in a statement.

Hurricane Maria was the largest hurricane event in the U.S. territories’ history, A.M. Best said, with modeled insured loss estimates ranging from $15 billion to $85 billion. These loss estimates include wind, storm surge and flood damage in the United States and the Caribbean, with the majority of losses coming from Puerto Rico.

A.M. Best said it currently assigns ratings to a number of local insurers writing business in Puerto Rico and the Caribbean. Based on the preliminary loss information, the company said, it appears that loss estimates from Hurricane Maria, while large, have not breached the insurance companies’ net catastrophe reinsurance limits. 

In addition, loss estimates likely are to remain within each company’s reinsurance coverage limits and net risk tolerance. Local insurers operating in Puerto Rico and the Caribbean generally retain very modest property retentions due to modest risk appetite for property exposure. 

Therefore, these insurers make extensive use of quota share reinsurance and catastrophe reinsurance, which over the years has served them well.  

While A.M. Best does not anticipate any rating actions at this time, some concerns remain regarding liquidity, as most of these companies look to their reinsurers to provide the funds to pay claims. 

In some cases, advances through reinsurance cash calls have been used. In addition, A.M. Best said significant challenges remain regarding the territories’ infrastructure, which could pressure or delay the claims settlement process and add potential uncertainty regarding companies’ strategic plans.