Insurers, reinsurers and insurance-linked securities (ILS) investors could face significant losses due to Hurricane Michael, according to A.M. Best.
A.M. Best’s briefing, ‘insurers and reinsurers brace for Hurricane Michael catastrophe losses’, breaks down the impact that the hurricane may have on the market.
Hurricane Michael, which is the seventh hurricane of the Atlantic season, could be the strongest to make landfall along the Florida panhandle since 2005, with some meteorologists suggesting it could be one of the worst to ever strike the area.
In August 2018, the Federal Emergency Management Agency secured a three-year reinsurance placement for the National Flood Insurance Programme (NFIP).
The programme was directly backed by capital market investors and complements the NFIP’s existing traditional reinsurance coverage for 2018.
The briefing suggested that “depending on the storm’s intensity after making landfall, the potential for insurable losses could put some pressure on reinsurers, as well as primary insurers.”
It also noted that investors in multiple types of ILS, including catastrophe bonds, could also suffer financial losses due to damages stemming from Hurricane Michael.
Insurers with the largest market shares in the US states that will be hit by the hurricane have considerable exposure, however, the briefing suggested that these are manageable given each company’s overall policyholder surplus.
A.M. Best is monitoring forecasts for Hurricane Michael closely and is evaluating the potential impact from expected losses.
According to the briefing, A.M. Best does not anticipate a large number of rating actions related to it, as current ratings and outlooks for insurance companies have taken into consideration catastrophic events such as this one.
