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Fitch: Hurricane Coverage Sufficient for U.S. Reinsurers

Posted on 25 May 2012 by Neilson

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The U.S. reinsurance sector retains sufficient capacity to meet the demand for coverage prior to the approaching U.S. hurricane season, according to Fitch Ratings' annual hurricane season desk reference.

Early forecasts for 2012 predict below-average hurricane activity in the North Atlantic. Additionally, reinsurers also have sufficient underwriting capacity after high catastrophe losses resulted in declines in both statutory surplus and shareholders' equity last year.

Many domestic property insurers and global reinsurers reported declines in statutory surplus and shareholders’ equity in 2011 due to high catastrophe losses, according to the ratings agency. But Fitch also said that sufficient underwriting capacity remains available in the reinsurance markets.

Traditional insurance coverage is also supplemented by reinsurance linked securitizations which accelerated in 2012 from the largest amount of catastrophe bond issuance ($1.5 billion) of any first quarter in history.

According to Fitch, the U.S. property reinsurance segment experienced significant price improvement in recent quarters as the market continues to react to the catastrophe events of 2011, both international and domestic, along with continued integration of Risk Management Solutions’ (RMS) version 11.0 hurricane model update. Fitch said each factor has served as a catalyst for positive pricing movement in the U.S. property insurance market, specifically in regions and lines of business with significant catastrophe exposure.