Reinsurers would shoulder more of the load in an active 2008 hurricane season: Fitch

If the 2008 hurricane season features only small to moderate storms (as experienced in 2004), primary insurers will disproportionately incur catastrophe losses relative to reinsurers. However, the opposite rings true if the season includes one or more large or very large events (such as in 2005), Fitch Ratings predicts.
Fitch predicts the declining cost of catastrophe reinsurance in 2008 could cause ceding companies to lower their attachment points and purchase additional limits to contain earnings volatility from extreme events.
In contrast, during 2006 and 2007, primary companies were more likely to reduce their reinsurance expenditures by increasing their retentions and purchasing lower limits.
Fitch expects a subtle shift towards lower attachment points and greater reinsurance limits purchased in 2008. “All else equal, this would tend to increase the reinsurers’ exposure to multiple storms and lead to a greater share of total losses arising from severe events,” Fitch notes in its report.
Who is most on the hook for hurricane damages in the 2008 season?
In a group of 18 Gulf Coast and eastern seaboard states, State Farm has the greatest percentage of personal lines market share in 12 of the states. State Farm writes approximately 30% of the statutory direct written premium in these areas, Fitch observes in its 2008 hurricane season desk reference guide.
In commercial lines, Travelers Group has the greatest market share in 10 of the states, with a total of 5% of the statutory direct written premium.