There is sufficient capacity available in insurance and reinsurance markets to provide sufficient coverage and withstand potential losses from hurricane related perils this storm season, according to Fitch Ratings’ annual hurricane season report.
Early forecasts for the 2013 U.S. hurricane season predict that the North Atlantic Basin is more likely to experience above-average hurricane frequency relative to long-term results, as a number of environmental forces appear positioned to produce above-average storm activity.
Pricing on U.S. hurricane-exposed property business has generally improved on the heels of losses experienced due to Superstorm Sandy and Hurricane Isaac in 2012, according to Fitch. The emergence of losses related to these events has been a catalyst for pricing increases in the primary U.S. property insurance market, specifically in regions and lines of business with significant catastrophe exposure. However, in the reinsurance space, catastrophe reinsurance pricing, particularly in the higher profile Florida market, continues to be dampened by an abundance of underwriting capacity and growing competition from alternative reinsurance products, Fitch said.
Fitch said the capital markets remain a strong and growing presence in the market for underwriting and offering protection from catastrophe risks. The continued low interest rate environment, along with the desire of (re)insurance companies to utilize alternatives to the traditional insurance risk transfer market, has generated significant growth in new capital from third-party investors. The process of insuring higher catastrophe-exposed areas, including Florida, continues to evolve as insurers of high-risk property test the waters of alternative risk transfer, according to the ratings agency.
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