A.M. Best has begun an assessment of the potential financial impact Hurricane Irene’s passage through the Caribbean and up the East coast of the U.S. might have on the property/casualty industry in the U.S., Caribbean as well as the global reinsurance market.
Best said that, despite the considerable catastrophe losses recorded through the first half of 2011, the overall P/C industry remains “adequately” capitalized.
However, Best said that it expects that Hurricane Irene, as well as the potential for an ongoing active hurricane season, will further test the U.S. P/C and global reinsurance markets as budgets for catastrophe-related losses have already been exhausted.
“Although the P/C industry in aggregate remains adequately capitalized to absorb these losses, given the considerable accumulation of catastrophe losses during 2011 and the potential for continued hurricane activity as the industry enters the ‘peak’ of hurricane season, some individual companies may face capital and ultimately, rating pressure,” the rating agency said.
Bests aid its rating assessments include a “risk-adjusted view of overall capitalization which incorporates a reasonably severe event.”
The rating agency also said that because it has already factored catastrophic events into its analysis, it does not anticipate a significant number of rating actions to be associated with Hurricane Irene.
However, Best said, companies with significant market share in the regions affected by the storm will be closely evaluated and that could mean some negative rating actions..
The Best analysts also said that the overall global reinsurance sector remains well capitalized and should fare well provided the losses are within their expected risk tolerances. “Outsized losses on individual companies will be evaluated as they arise,” said Best.
Source: A.M. Best