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S&P Sees Irene Expects Limited Impact on P/C Insurers

Posted on 30 Aug 2011

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According to a commentary published today on RatingsDirect, based on preliminary insured loss estimates, Standard & Poor's Ratings Services expects a somewhat limited impact from Hurricane Irene on U.S. property/casualty insurers and global reinsurers.

Nonetheless, the commentary, "Hurricane Irene Will Likely Have A Limited Impact On Re/Insurers, But 2011 Catastrophe Losses Are Adding Up," notes the hurricane occurred in the middle of the Atlantic hurricane season with forecasts of above-average activity and in a year of unusually frequent and severe natural catastrophes.

Early reports indicate that estimated insured losses from Irene will likely be less than $5 billion. "We do not believe that the magnitude of this event is such that it will significantly influence the industry's creditworthiness, and expect few, if any, rating changes as a result," said Standard & Poor's credit analyst Taoufik Gharib.

S&P believes that this will affect primary insurance companies more than reinsurers because primary insurers generally retain greater property catastrophe risk at these loss levels. Furthermore, based on the current Hurricane Irene insured loss estimates, S&P does not anticipate taking any rating actions on any of the natural catastrophe bonds that we rate. However, the credit agency will continue to monitor the aftermath of the hurricane, and will comment and take action as appropriate given that losses are still evolving and these estimates might change.

S&P alos believes that the re/insurance industries, in aggregate, are well capitalized to absorb this loss. However, Irene is just the latest natural catastrophe in a year of an unusually high frequency and severity of natural disasters (earthquakes in Japan and New Zealand, floods and cyclones in Australia, and winter storms and tornadoes in the U.S.), and large individual commercial claims globally.