After two years in a row of relatively light hurricane damage, U.S. insurers and policyholders have become complacent, which carries negative implications, Fitch Rating announced today.

Its comment came as the firm released a special report, "Hurricane Season 2008: A Desk Reference For Insurance Investors," its annual hurricane season guide. The official start of hurricane season is June 1.

Donald F. Thorpe, senior director, explaining the negative implications as a result of two light hurricane years, said in a statement that Fitch Ratings forecasts for 2008 call for an above-average hurricane season.

This year, he said, follows a season in which there were little or no hurricane losses for most insurers. "In fact, 2007 was the second consecutive year in which high levels of hurricane activity were predicted and insured losses were minimal.

"Fitch believes this situation has negative implications for insurer solvency and profits because it fosters complacency on the part of both policyholders and insurers. More importantly, it provides political ammunition to those who would weaken long-term industry solvency for near-term insurance price reductions," said Mr. Thorpe.

The company said the hurricane guide contains the most recent forecasts for the upcoming hurricane season from leading forecasters and analyzes the top-10 insurers by market share for each of the 18 coastal U.S. states in both personal and commercial insurance.

Readers using the guide, Fitch said, can quickly assess the effect of a major storm on insurers. If there is a hurricane in 2008, statistical tables from the guide will give investors a quick way to calculate the approximate gross hurricane loss by insurer in the early hours following an event, before companies begin to release loss estimates.

Fitch said the guide includes background information on U.S. hurricanes and key terms as appendices to its report.

Additionally, Fitch follows developments in the legal action stemming from the 2004-2005 hurricane seasons and new proposals for New York catastrophe reserves.

This year the rating service hurricane guide in a special section looks at the 70th anniversary of the "Long Island Express," the epic hurricane that ploughed through New York's Long Island and New England in 1938.

Also in its pages are the new proposals on catastrophe reserves; a FAQ; statistics on the most costly hurricanes in the U.S.; hurricane-related deaths in the U.S.; and information on insurer market share state-by-state.

The report mentions that:

o Hurricanes can strike the East Coast anywhere from Texas to Maine.

o The last time a hurricane made a direct hit on New York State was Hurricane Gloria in 1985 (23 years ago). The average is 13 years.

o The last time a hurricane made a direct hit on New York City was 1903 (105 years ago).

o After the 1938 Long Island hurricane, it was reported that an estimated 750,000 chickens were killed. If that event repeated today, the economic costs would be significantly different.

Fitch customers can get the report online at www.fitchratings.com under the following headers: Financial Institutions > Insurance > Special Reports.

Special Reports /

Fitch Says Insurers Too Smug After Low Hurricane Years

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