Losses to the insurance and reinsurance industry from hurricane Matthew are expected to largely fall within the sector’s catastrophe budgets for the second half of 2016, according to analysts at Peel Hunt.
As we wrote earlier today, the early insurance and reinsurance industry loss estimates suggest an impact to the sector somewhere around the $4 billion to $6 billion mark, while some modelled scenarios from Saturday morning suggested a maximum insurance industry loss of $8 billion in the U.S.
Analysts at Peel Hunt, in a report on the potential impact of hurricane Matthew to some Lloyd’s of London re/insurers, said that it expects “aggregate insured losses are more likely to fall within our catastrophe budgets for 2016H2 than moderately exceed them.”
As a result of this, with the insurance and reinsurance industry still extremely well capitalised, there is an expectation that “Overall Matthew’s impact on already soft reinsurance rates will probably be limited,” the analysts explained.
As the outlook for losses from hurricane Matthew improved, once it became clearer that the impact was not as severe as had initially been feared, Peel Hunt’s analysts said that insured losses were likely to fall “lower than our initial 50% peak loss sensitivity scenario.”
There looks likely to be a split in the type of insured losses, with hurricane force winds at their strongest further south in Florida, while surge became more of a factor in the north of the state. For Georgia and the Carolina’s, wind speeds had declined somewhat and so surge and also inland flooding look likely to be the main source of loss, but with the National Flood Insurance Programme (NFIP) likely to deal with most rainfall related flood impacts.
Peel Hunt’s analysts expect that insurance and reinsurance industry losses will revolve around “a) commercial flood losses, b) residential wind damaged c) Marine losses and d) possible leakage between residential flood into wind damage as loss adjusters will in many cases struggle to properly allocated the losses in the more hard struck areas.
When analysing the potential for losses from hurricane Matthew the analysts explain that aggregation risk is expected to be a factor, as “Matthew has spent three days moving along hundreds of miles of US Coastal properties and it will take a while before a full picture will emerge of the storms damage footprint.”
Losses from hurricane Matthew seem likely to be manageable for insurers, reinsurers and any affected ILS players, which means as we head towards the end of the hurricane season there looks unlikely to be any impact on January reinsurance renewal rates as a result of this storm.
Yes, the losses could worsen some companies results for the fourth-quarter, but if they come within catastrophe budgets insurance and reinsurance firms will largely report still profitable quarters and the sector which is characterised by abundant capital will remain so.
Read our previous articles on hurricane Matthew: