The fact that U.S. property/casualty insurers’ earnings have taken a hit due to recent catastrophe losses should not by itself mean insurer ratings will change, according to one rating firm.
As long as the insurers that its actuaries rate have properly utilized reinsurance to protect their balance sheets, they will not be downgraded solely because losses related to catastrophes have adversely impacted their short-term earnings, said Ohio-based financial analysis firm Demotech, which issues Financial Stability Ratings on insurers.
“Property and casualty insurers exist to protect consumers. If the companies we review and rate have adequately protected their balance sheets, by purchasing sufficient reinsurance protection, we will not penalize them for doing their job,” said Joe Petrelli, Demotech president.
He also said that reinsurers that have utilized retrocessions to protect their balance sheets from catastrophe exposure will not be downgraded due to a degradation of their short-term earnings.
From April 2010 through June 20, 2011 there were 82 domestic catastrophes. During this 14 month period, domestic insurers have been hit with billions of dollars in losses from catastrophe situations such as earthquakes, flooding, an oil spill, severe weather, tornadoes, tropical storms, seasonal storms and wildfires.
One report pegged catastrophe losses at more than $15 billion already this year.
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