Huge hurricane Matthew in Caribbean approaching Florida in America. 3D illustration. Elements of this image furnished by NASA
Huge hurricane Matthew in Caribbean approaching Florida in America. 3D illustration. Elements of this image furnished by NASA

A.M. Best does not anticipate a significant number of rating actions related to Hurricane Matthew, as most rated insurance carriers have sufficient capital and appropriate reinsurance programs in place to effectively absorb this event, according to a new briefing from the ratings company.

Hurricane Matthew left a trail of wind and flood damage throughout U.S. southeastern coastal regions in early October 2016. The Best’s Briefing, titled, “Significant Damage From Hurricane Matthew Appears Manageable for Insurers,” notes that many top homeowners/farmowners and automobile writers in the affected states have diverse geographic footprints and product profiles, in addition to possessing an appropriate level of risk-adjusted capitalization.

A.M. Best said solid overall risk management profiles and capabilities, inclusive of comprehensive reinsurance programs, should help ensure that these organizations are adequately protected from the potential losses to emanate from the storm.

For these organizations, A.M. Best expects the impact is more likely to have a notable effect on fourth-quarter earnings than on overall balance sheet strength. Conversely, for the smaller, more geographically concentrated property insurers with exposure in the affected areas, it may take more time for claims to be processed and classified. Due to the potentially large volume of claims reported, it most likely will take longer to determine the extent of the losses. It is possible that the impact to these smaller, more concentrated companies will adversely affect earnings and capitalization.

Nevertheless, regardless of the size of the carrier, reinsurance coverage and risk concentration parameters will have a material influence on mitigating the impact of the hurricane losses. Initial indications suggest that total losses will be within established catastrophe reinsurance limits for A.M. Best-rated entities.

It had been more than a decade since a hurricane made landfall in Florida until Hurricane Hermine did so in early September 2016. The episodes of volatile weather as evidenced by Hurricane Hermine and now Hurricane Matthew are stark reminders of the damage to which property/casualty insurers can be exposed, the ratings company said. A.M. Best said it believes it also brings into focus the need for companies to continue employing prudent risk management practices that adjust as risk factors such as business profile and company retentions shift over time.

Source: A.M. Best