CHICAGO & NEW YORK--(BUSINESS WIRE)--Hurricane Hermine is expected to have a modest impact on the property/casualty (P/C) and catastrophe (cat) bond markets, according to Fitch Ratings. Insured losses for reinsurers from this event will also likely be limited, but Fitch believes the hurricane could depress third quarter results for primary insurers in the affected region.
Hermine became the first hurricane to make landfall in the state of Florida in over a decade on Sept. 2, reaching its peak intensity as a Category 1 hurricane before weakening as it crossed through Georgia and South Carolina and headed into the Atlantic. As a post-tropical storm, Hermine also produced high winds and waves along the coast of the Mid-Atlantic states as it traveled northeast.
Karen Clark & Company estimates that insured losses from the event will approach $500 million, with economic damage of around $1 billion. That level would be manageable for the industry, but could depress third-quarter 2016 earnings for primary writers in Florida and other US southeast states, according to Fitch.
The companies with the five largest homeowners' exposure in Florida, as measured by statutory direct written premium, include Universal Insurance Holding Group, Tower Hill, State Farm Mutual, Citizens Property Insurance and Federated National Insurance.
Market share dynamics in Florida have changed considerably since 2005's Hurricane Wilma, the last hurricane that came ashore in the state. In the 11 years since, homeowner insurance risk in Florida has shifted away from national writers and Citizens. Smaller Florida specialist homeowners' insurers grew significantly during that period and now hold approximately 60% Florida homeowners' insurance market share.
The state-run Florida Hurricane Cat Fund (FHCF) remains the largest reinsurer of Florida property risks. FHCF's capital position and claims-paying capacity greatly improved during this extended period without a major Florida storm loss.
The limited history for most new primary companies means that their balance sheets and operating infrastructures are untested by any large loss experience. Also, the ability for these companies to quickly and effectively assess and pay losses during a substantial increase in claims from a large hurricane landfall is uncertain. Loss experience from Hermine will provide insight into the preparedness of the Florida specialist companies for the next significant storm that hits the state.
Numerous outstanding catastrophe bonds include Florida and other east coast states in their exposure to hurricane/named storm risk; however Fitch does not expect losses to materialize for any outstanding catastrophe bond given the relatively small insured loss expectations from the event.
Additional information is available on www.fitchratings.com.
The above article originally appeared as a post on the Fitch Wire credit market commentary page. The original article, which may include hyperlinks to companies and current ratings, can be accessed at www.fitchratings.com. All opinions expressed are those of Fitch Ratings.
ALL FITCH CREDIT RATINGS ARE SUBJECT TO CERTAIN LIMITATIONS AND DISCLAIMERS. PLEASE READ THESE LIMITATIONS AND DISCLAIMERS BY FOLLOWING THIS LINK: HTTP://FITCHRATINGS.COM/UNDERSTANDINGCREDITRATINGS. IN ADDITION, RATING DEFINITIONS AND THE TERMS OF USE OF SUCH RATINGS ARE AVAILABLE ON THE AGENCY'S PUBLIC WEBSITE 'WWW.FITCHRATINGS.COM'. PUBLISHED RATINGS, CRITERIA AND METHODOLOGIES ARE AVAILABLE FROM THIS SITE AT ALL TIMES. FITCH'S CODE OF CONDUCT, CONFIDENTIALITY, CONFLICTS OF INTEREST, AFFILIATE FIREWALL, COMPLIANCE AND OTHER RELEVANT POLICIES AND PROCEDURES ARE ALSO AVAILABLE FROM THE 'CODE OF CONDUCT' SECTION OF THIS SITE. FITCH MAY HAVE PROVIDED ANOTHER PERMISSIBLE SERVICE TO THE RATED ENTITY OR ITS RELATED THIRD PARTIES. DETAILS OF THIS SERVICE FOR RATINGS FOR WHICH THE LEAD ANALYST IS BASED IN AN EU-REGISTERED ENTITY CAN BE FOUND ON THE ENTITY SUMMARY PAGE FOR THIS ISSUER ON THE FITCH WEBSITE.