The global reinsurance industry is in a strong position to take on losses from “Superstorm” Sandy, which recently hit the eastern United States, Fitch Ratings said Monday.
A “solid” capital position, combined with few catastrophe losses throughout the year has left the reinsurance industry well-positioned to weather losses from Sandy, Fitch said in a statement. The company is also not expecting any negative ratings actions on reinsurers from losses arising from the storm, it added.
“In previously published research reports, our assessment has been that losses from a single event would need to exceed $60 billion to likely trigger a reinsurance sector outlook revision to Negative from Stable,” it noted.
Catastrophe modeller EQECAT Inc. has estimated insured losses of between $10 billion and $20 billion, while AIR Worldwide has estimated those losses to be lower at between $7 billion and $15 billion. Estimates have been more difficult to make because of widespread flooding and other business interruption losses resulting from the storm.
“If the current loss estimates from EQECAT and AIR are consistent with actual losses, the storm is not likely to be a market-changing event that would cause reinsurance pricing to increase significantly at the Jan. 1 renewals,” Fitch noted.
“However, due to the scale and complexity of the event, the ultimate level of insured losses remains highly uncertain,” Fitch noted. “As such, we will continue to monitor developments related to Sandy for any potential rating implications to reinsurers.”
If industry losses reach $10 billion or more, the reinsurance industry will see the greater share of losses, Fitch said. Some reinsurers may also have “overconcentration” in the northeast U.S., although the company said it views most reinsurers as having diversified exposure.
“Prior to Sandy, rate changes were anticipated to trend moderately in the range of down 5% to up 5%, with reinsurer capital strengthened from below-average catastrophe losses,” Fitch said. “With the additional losses from Sandy, we view a decline in property catastrophe rates at Jan. 1 as less likely; however any significant rate increases should be restricted to the loss affected lines in the Northeast U.S. region.”
Photos: Damage in New Jersey after Hurricane Sandy made landfall. (Credit: Tim Larsen, Office of the Governor of New Jersey)