Standard & Poor's Ratings Services said that with some geographic exceptions it does not expect Midwest flooding to impact ratings or outlooks for the majority of insurers that it rates.

The impact on carriers, it estimated, will be minimal.

But those property-casualty writers that are geographically concentrated in the affected states--especially those focused on Indiana, Illinois, Iowa and Wisconsin--may have proportionately higher losses, S&P said.

Those losses combined with the effects of the softening pricing cycle, weak financial markets and an active catastrophe season, may trigger a few ratings actions, the company said.

National/multinational carriers with product and geographic diversification will not be subject to losses that would have an effect on capital, and no rating actions are expected for these companies, said S&P.

The government will likely retain large losses, the firm said, because it fully insures flood damages (for participating residential and commercial policyholders) and provides an important backstop of losses in multiperil crop insurance for commercial insureds.

In addition, the firm said there would be some increased insurer loss activity from the farm owners, homeowners, commercial multiperil, business interruption and allied lines of business.

Most of these losses will likely result from covered perils which occurred during the initial storms--tornados, high winds and lightning, S&P explained.

S&P said while the flooding began in early June and has lasted into July, its scope and impact is diminishing as favorable weather conditions cause water levels to recede.

S&P noted that privately owned insurance companies can participate in the crop insurance business by a reinsurance agreement with FCIC. For the past 10 years, the participation in this business has been very profitable, the company said.

Insurance companies participating in this business buy excess of loss or catastrophic reinsurance to protect them against a major event. The backstop of losses in the multiperil crop insurance provided by the federal government in addition to private reinsurance bought by the p-c insurance carriers will limit the impact on the industry as a whole, the rating firm explained.

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Midwest Flood Loss Minimal For Insurers, Says S&P

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