Fitch Ratings has warned that losses from the predicted above-average hurricane season could change its stable rating look on the property/casualty and global reinsurance sectors.
Fitch noted in a report that there is an “elevated” chance of a hurricane making landfall in 2021 given the storm season predictions. Six storms made landfall on the US Atlantic or Gulf Coast at hurricane intensity in 2020, Fitch noted, the most since 2005. The most destructive was Hurricane Laura, causing an estimated $19 billion of damage after making landfall in Louisiana.
It said that although positive rate increases and the fact that the industry capital strength remains very strong “a confluence of large events may lead to capital reductions and ratings pressures”.
The Climate Prediction Center of the National Oceanic and Atmospheric Administration has forecast an above-normal Atlantic hurricane season with a likely range of 13 to 20 named storms. London’s Tropical Storm Risk suggests there could be 18 named storms in 2021.
Fitch also noted that despite the elevated storm predictions, demand for cat bonds remains strong. It also noted that storm coverage in Florida remains heavily dependent on reinsurance.
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