U.S. Insurers Have Capacity to Provide 2012 Hurricane Coverage: Fitch

May 25, 2012

Sufficient capacity remains available in the insurance and reinsurance markets to meet the demand for coverage prior to the approaching U.S. hurricane season, according to Fitch Ratings.

Early forecasts for the 2012 U.S. hurricane season are that the North Atlantic Basin will likely produce below-average hurricane frequency relative to long-term results.

According to Fitch, many domestic property insurers and global reinsurers reported declines in statutory surplus and shareholders’ equity in 2011 due to high catastrophe losses. However, Fitch said that sufficient underwriting capacity remains available in the (re)insurance markets.

Traditional insurance coverage is also supplemented by(re)insurance linked securitizations which accelerated in 2012 from the largest amount of catastrophe bond issuance ($1.5 billion) of any first quarter in history, Fitch said.

According to the ratings agency, the U.S. property (re)insurance segment experienced significant price improvement in recent quarters as the market continues to react to the catastrophe events of 2011, both international and domestic, along with continued integration of Risk Management Solutions’ (RMS) version 11.0 hurricane model update. Fitch said each factor has served as a catalyst for positive pricing movement in the U.S. property insurance market, specifically in regions and lines of business with significant catastrophe exposure.

The analysis is included in Fitch’s annual hurricane season desk reference, which provides geographic market share analysis to estimate the potential effects of a major storm in different areas on large insurance companies and the industry as a whole. The report also compares forecasts for the 2012 hurricane season with the National Oceanic and Atmospheric Administration, Colorado State University, Tropical Storm Research, Accuweather.com, and WSI Corp.

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