CHICAGO & NEW YORK--(BUSINESS WIRE)-- Hurricane Matthew will pressure the earnings of some insurance underwriters in Florida and other southeast states but is not expected to present a major capital challenge, Fitch Ratings says. Fitch estimates that if the storm results in insured losses in excess of $10 billion, a greater proportion of losses will be borne by reinsurers as opposed to primary companies.
Matthew has impacted several countries in the Caribbean causing significant damage and immeasurable loss of life. The storm has skirted the Florida coastline, generating high winds and storm surge. A continued northern path along the coast would lead to damage in Georgia and the Carolinas. Evaluations of damage related to Matthew will depend heavily on the storm's ultimate path. Post-storm, it will take significant time to assess industry wide and company-specific insured losses.
Fitch assessed the risks related to the 2016 hurricane season and the Florida homeowner's insurance market in the report "U.S. Hurricane Season 2016 (A Desk Reference for Insurance Investors)".
The Florida market has evolved considerably in the last decade. Homeowner's market share has shifted away from large national writers and state-sponsored Citizens Property Insurance Corp. to a number of smaller Florida homeowners specialists. A lack of storm activity over the last decade has substantially increased the claims paying resources to meet catastrophe losses, such as those arising from Matthew, of both Citizens and state-sponsored reinsurer, the Florida Hurricane Catastrophe Fund (FHCF).
The smaller Florida specialist homeowners insurers now hold approximately 60% of Florida homeowners insurance market share. The primary insurers with the five largest homeowners exposure in Florida, as measured by statutory 2015 direct written premiums, include Universal Insurance Holding Group, Tower Hill Group, State Farm Mutual Group, Citizens Property Insurance Corporation and Federated National Insurance Company.
The limited history for the newer specialty insurers means that the resiliency of their balance sheets and claims management functions are relatively untested by a large catastrophe event. Loss experience from Matthew will provide insight into the underwriting expertise of the Florida specialist companies and their ability to service a significant amount of claims.
Property insurers' writing business in Florida relies heavily on reinsurance protection and other methods to mitigate their risk of extreme loss. As a result, the FHCF, the traditional and collateralized reinsurance markets and the catastrophe bond market, could have meaningful exposure to losses from Matthew. Fitch estimates that FHCF has assumed the largest level of premiums by a wide margin. Among private entities, Lloyd's of London appears to be the next largest reinsurer followed by Allianz SE; Tokio Marine Holdings, Inc.; Everest Re Group, Ltd.; and XL Group plc.
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.
U.S. Hurricane Season 2016 (A Desk Reference for Insurance Investors)
Copyright © 2016 by Fitch Ratings, Inc., Fitch Ratings Ltd. and its subsidiaries. 33 Whitehall Street, NY, NY 10004. Telephone: 1-800-753-4824, (212) 908-0500. Fax: (212) 480-4435. Reproduction or retransmission in whole or in part is prohibited except by permission. All rights reserved. In issuing and maintaining its ratings and in making other reports (including forecast information), Fitch relies on factual information it receives from issuers and underwriters and from other sources Fitch believes to be credible. Fitch conducts a reasonable investigation of the factual information relied upon by it in accordance with its ratings methodology, and obtains reasonable verification of that information from independent sources, to the extent such sources are available for a given security or in a given jurisdiction. The manner of Fitch's factual investigation and the scope of the third-party verification it obtains will vary depending on the nature of the rated security and its issuer, the requirements and practices in the jurisdiction in which the rated security is offered and sold and/or the issuer is located, the availability and nature of relevant public information, access to the management of the issuer and its advisers, the availability of pre-existing third-party verifications such as audit reports, agreed-upon procedures letters, appraisals, actuarial reports, engineering reports, legal opinions and other reports provided by third parties, the availability of independent and competent third- party verification sources with respect to the particular security or in the particular jurisdiction of the issuer, and a variety of other factors. Users of Fitch's ratings and reports should understand that neither an enhanced factual investigation nor any third-party verification can ensure that all of the information Fitch relies on in connection with a rating or a report will be accurate and complete. Ultimately, the issuer and its advisers are responsible for the accuracy of the information they provide to Fitch and to the market in offering documents and other reports. In issuing its ratings and its reports, Fitch must rely on the work of experts, including independent auditors with respect to financial statements and attorneys with respect to legal and tax matters. Further, ratings and forecasts of financial and other information are inherently forward-looking and embody assumptions and predictions about future events that by their nature cannot be verified as facts. As a result, despite any verification of current facts, ratings and forecasts can be affected by future events or conditions that were not anticipated at the time a rating or forecast was issued or affirmed.
The information in this report is provided "as is" without any representation or warranty of any kind, and Fitch does not represent or warrant that the report or any of its contents will meet any of the requirements of a recipient of the report. A Fitch rating is an opinion as to the creditworthiness of a security. This opinion and reports made by Fitch are based on established criteria and methodologies that Fitch is continuously evaluating and updating. Therefore, ratings and reports are the collective work product of Fitch and no individual, or group of individuals, is solely responsible for a rating or a report. The rating does not address the risk of loss due to risks other than credit risk, unless such risk is specifically mentioned. Fitch is not engaged in the offer or sale of any security. All Fitch reports have shared authorship. Individuals identified in a Fitch report were involved in, but are not solely responsible for, the opinions stated therein. The individuals are named for contact purposes only. A report providing a Fitch rating is neither a prospectus nor a substitute for the information assembled, verified and presented to investors by the issuer and its agents in connection with the sale of the securities. Ratings may be changed or withdrawn at any time for any reason in the sole discretion of Fitch. Fitch does not provide investment advice of any sort. Ratings are not a recommendation to buy, sell, or hold any security. Ratings do not comment on the adequacy of market price, the suitability of any security for a particular investor, or the tax-exempt nature or taxability of payments made in respect to any security. Fitch receives fees from issuers, insurers, guarantors, other obligors, and underwriters for rating securities. Such fees generally vary from US$1,000 to US$750,000 (or the applicable currency equivalent) per issue. In certain cases, Fitch will rate all or a number of issues issued by a particular issuer, or insured or guaranteed by a particular insurer or guarantor, for a single annual fee. Such fees are expected to vary from US$10,000 to US$1,500,000 (or the applicable currency equivalent). The assignment, publication, or dissemination of a rating by Fitch shall not constitute a consent by Fitch to use its name as an expert in connection with any registration statement filed under the United States securities laws, the Financial Services and Markets Act of 2000 of the United Kingdom, or the securities laws of any particular jurisdiction. Due to the relative efficiency of electronic publishing and distribution, Fitch research may be available to electronic subscribers up to three days earlier than to print subscribers.
For Australia, New Zealand, Taiwan and South Korea only: Fitch Australia Pty Ltd holds an Australian financial services license (AFS license no. 337123) which authorizes it to provide credit ratings to wholesale clients only. Credit ratings information published by Fitch is not intended to be used by persons who are retail clients within the meaning of the Corporations Act 2001
Fitch Ratings, Inc.
Christopher A. Grimes, CFA
+1 312 368-3263
Fitch Ratings, Inc.
70 W. Madison Street
Chicago, IL 60602
James B. Auden, CFA
+1 312 368-3146
Justin Patrie, CFA
+1 646 582-4964
Hannah James, + 1-646-582-4947
Source: Fitch Ratings