11 October 2018 13:30
Hurricane Michael will affect more insurers and reinsurers with a high concentration of premiums in Florida, according to a report from the rating agency Moody’s. It is expected that the event resulted in damages in excess of us $ 4.5 billion, according to the estimated preliminary S&P Global Ratings.
Depending on the severity of the losses, the primary insurers share probably the burden of the losses with reinsurers, and capital providers alternative, predicted Moody s.
The local insurers in the hot water
Local insurers face the risk that their capital decline if the losses from the event exceed their reinsurance limits. In which at least 75 % of the premiums for home insurance and of goods for individuals and businesses are subscribed for in Florida are the most vulnerable, cites the agency.
The same situation applies for reinsurers, says Moody s. ” The reinsurers with a concentration in Florida will be more vulnerable than those with a diversified exposure globally. “
The diversification mitige losses
In contrast, the largest u.s. insurers in the home have, on average, only 3% of concentration of premiums in the state of Florida, which will enable them to absorb losses related to the hurricane, argue the authors of the report.
“These insurers have considerable resources capable of enduring a significant event based on monitoring of exposure of the coasts, their geographic diversification, protection for the reinsurance of high quality and good capital base,” says the firm.
The three sectors affected
Moody’s expects that the damages are shared between the owners of residences, businesses, and business interruption, ” while insurers should have to wait for weeks to have a reliable estimate of the loss “.
It is also expected that the greater damage will be caused by the wind and storm surge rather than by flooding. The firm says that the forecasts indicate about a foot of rain, ” reducing the likelihood that floods cause the most losses.”