A.M. Best Comments on Potential Impact of Hurricane Harvey on U.S. Property/Casualty Industry

Business Wire

OLDWICK, N.J.--(BUSINESS WIRE)-- With Hurricane Harvey quickly strengthening and threatening the Texas coastline, A.M. Best has begun to assess the potential financial impact this event may have on the U.S. property/casualty (P/C) industry.

The most recent track of Harvey has the storm path running nearly perpendicular to the coast of Texas and aiming to make landfall by the morning of Aug. 26, 2017, with winds near the eye of the storm projected to maintain at minimum Category 3 strength at greater than 110 miles per hour. This storm will likely cause severe property damage along the coast of Texas and potentially inland as well.

Tropical storm activity in Texas had been relatively calm in recent years. Tropical storms and smaller hurricanes have come ashore in Texas and Mexico, with some wind and rain impact in Texas. The last major hurricane to make direct landfall in Texas was Hurricane Ike in 2008, a Category 2 hurricane covering a wide geographic area and causing nearly $20 billion in damages industry-wide.

A.M. Best’s Credit Rating (rating) assessment includes a risk-adjusted view of overall capitalization, which incorporates a reasonably severe event, as well as detailed analysis of an insurer’s catastrophe reinsurance programs. As catastrophic events already have been factored into the analysis, A.M. Best does not anticipate a significant number of rating actions for A.M. Best-rated entities to be associated with Hurricane Harvey. However, rated entities with significant market share in the region impacted will be evaluated relative to A.M. Best’s previous loss expectations and any material deviations potentially could lead to negative rating action in the form of under-reviews, outlook revisions or downgrades.

Although company loss estimates will take time to accumulate, A.M. Best expects all rated entities to provide preliminary estimates and/or ranges of their potential loss within a reasonable time frame. These loss estimates should include any potential effect or involvement of various government specific “wind” and “beach” residual market mechanisms when applicable. Principal among these are the National Flood Insurance Program (NFIP), which is responsible for almost all flood coverage in the country, and the Texas Windstorm Insurance Association (TWIA), the state-mandated insurer of last resort that provides coverage for wind and hail losses only for properties in coastal counties that cannot get insurance in the private market. The NFIP has been stressed by severe flooding events in recent years (including Katrina in 2005 and Sandy in 2012), and now carries private reinsurance coverage to help maintain their claims paying abilities. Conversely, TWIA has not endured a major event in recent years and has seen its liquidity improve over that time. TWIA is funded by premiums, security issuances and reinsurance, and has the right to assess Texas property writers for additional funding if necessary.

A.M. Best will continue to monitor the financial impact of Hurricane Harvey on A.M. Best-rated entities and will provide updates on ratings as necessary.

A.M. Best is the world’s oldest and most authoritative insurance rating and information source. For more information, visit www.ambest.com.

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A.M. Best

Raymond Thomson, CPCU, ARe, ARM, 908-439-2200, ext. 5621

Associate Director

raymond.thomson@ambest.com

or

Greg Williams, 908-439-2200, ext. 5815

Senior Director

greg.williams@ambest.com

or

Christopher Sharkey, 908-439-2200, ext. 5159

Manager, Public Relations

christopher.sharkey@ambest.com

or

Jim Peavy, 908-439-2200, ext. 5644

Director, Public Relations

james.peavy@ambest.com