Fitch Ratings-Chicago- After a record-breaking hurricane season in 2020, U.S. property/casualty (re)insurers are bracing to absorb large potential catastrophe losses with projections for another above-average hurricane season, according to a new Fitch Ratings report.
After weathering the global pandemic last year, P/C insurers and global reinsurers are largely well capitalized and positioned to withstand a significant hurricane event in 2021. Fitch has a Stable Rating Outlook for the P/C and global reinsurance sectors.
Natural catastrophes, and particularly hurricanes, are a prime source of underwriting volatility for the P/C industry. Six hurricanes made landfall on the U.S. Atlantic or Gulf Coast in 2020 (the highest number in over 15 years), and that number could reach double digits this season.
“Recent active hurricane seasons have generated an accumulation of insured losses that have led to substantially higher premiums for coastal property insurance,” said Director Christopher Grimes. “Better pricing is attracting additional capital, including a recent influx of hurricane-exposed catastrophe bonds that helps absorb losses and maintain availability of coverage.”
Despite Florida being spared any significant landfall events and losses in 2020, specialty homeowners’ writers that collectively hold large market share in the segment suffered further large underwriting losses tied to claims litigation activity that greatly exceeds other states. Recent premium rate increases and state legislative actions to curb litigation may take some time to influence results. “Florida homeowners’ writers less favorable capital position creates a strong dependence on global reinsurers and the state sponsored Florida Hurricane Catastrophe Fund for underwriting capacity and protection against severe hurricane events,” said Senior Director Brian Schneider.
Fitch’s new report provides market share information on leading property insurance writers in 18 coastal states, which enable readers to quickly assess individual insurer’s potential exposure to a major storm before loss estimates are released.