Hurricane Dorian losses expected to hit reinsurers: KBW

Hurricane Dorian could become a significant event for reinsurers due to low retention levels in Florida property coverages, according to a briefing Thursday from analyst Keefe, Bruyette & Woods Inc.

“Given generally low Florida primary insurer retentions and increased YTD (year-to-date) reinsurance purchases, we think a major Florida catastrophe event will significantly impact the reinsurers; domestic primary insurers remain exposed up to their reinsurance attachment points,” KBW wrote in a Thursday briefing.

Dorian could also exacerbate growing 2019 catastrophe losses and put pressure on reinsurance markets into next year, the analysts added.

“We also think that YTD loss creep and potential significant Dorian losses means that catastrophe reinsurance rate increases and elevated reinsurance demand will persist into 2020,” KBW said in its briefing.

Dorian’s path remains to be seen, but forecasts have the storm making landfall with substantial force, the analysts noted.

“The National Hurricane Center now projects that Hurricane Dorian will strengthen into a Category 3 hurricane by Monday, when it should make landfall, impacting the entire Florida coastline, with heavy rain, storm surge, and 125 mph winds that should drive sizable losses,” KBW said Thursday.

Data from the note showed that Berkshire Hathaway Inc. has the largest market share in Florida at 8.0% as measured by direct written premium, but only 3.2% is catastrophe-exposed as a percentage of total net written premium. Cat-exposed line of business include allied lines, commercial auto property damage, commercial multiperil, earthquake, farmowners, federa, flood, fire, homeowners, inland marine, multiperil crop, private crop and private personal auto property damage, KBW said.

In a separate note Thursday, ratings agency Moody’s Inc. said Florida’s three state-sponsored, insurance-related entities — Citizens Property Insurance Corp., Florida Hurricane Catastrophe Fund Finance Corp. and Florida Insurance Guaranty Association — are all financially sound.

“All three entities have built up multiple sources of liquidity available to pay claims in the event of a large storm before turning to bonds,” Moody’s said in its note, adding, “For Florida’s insurance entities, additional debt from one very large storm or two back-to-back storms is manageable.”

According to data from A.M. Best & Co., Nationwide Group has the greatest commercial multiperil market share in Florida at 7.9%, $153.5 million direct written premium, followed by Tokio Marine U.S. PC Group with 6.72%, $130.7 million direct written premium, and Zurich Insurance U.S. PC Group with 5.96% and $115.8 million direct written premium.