Isabel ?No Serious Threat' to Ratings: S&P
NU Online News Service, Sept. 18, 4:26 p.m. EDT?-Standard & Poor's Ratings Services predicted this afternoon that based on preliminary loss projections, Hurricane Isabel "probably will not have a material impact" on primary property-casualty insurer or reinsurer ratings.
Steven Dreyer, analyst at New York-based S&P, commented that p-c insurers and reinsurers would be able to "absorb this sort of loss without widespread rating downgrades or insolvency concerns" even with capital depletion in recent years from terrorism losses, asbestos claims, and natural catastrophes.
"Insurers are assuming that the hurricane will probably be within the $1.5 billion-$2.5 billion damage range, which is not enough to move most insurance company ratings," Mr. Dreyer observed.
But he also warned that Hurricane Isabel will hurt some insurers more than others, adding that "smaller, geographically concentrated insurance companies could be exposed to a disproportionate level of catastrophe exposure."
S&P also forecast that geographically, North Carolina could be exposed to between $1 billion and $2 billion in damages, while Virginia and Washington, D.C., could be exposed to a few hundred million dollars combined.
Lines covering 90 percent of the expected damage are homeowners multiple peril, auto physical damage, and commercial multiple peril (property), S&P said.
The ratings agency also noted that the top-five insurers exposed to the highest Isabel-related catastrophe losses in North Carolina on a direct basis are Nationwide Group, State Farm Mutual Group, Allstate Insurance Co. Group, North Carolina Farm Bureau Insurance Group, and Travelers Property Casualty Corp.
"This is based on market share by catastrophe-exposed product line and expected loss severity in those lines," explained Alan Koerber, analyst at S&P. "Actual losses could vary, depending on the precise storm track and the geographic dispersion of policyholders at the company level," he said.
S&P also pointed out that, from a reinsurance standpoint, some companies could potentially have insignificant losses or even no losses at all if Isabel hits areas and primary companies that the reinsurance company does not cover.
Damien Magarelli, credit analyst at S&P, explained that at lower-category hurricane levels, the primary insurers would retain more of the losses and cede less. "As a result, for reinsurance companies, Isabel might simply turn a light catastrophe year into a more normal year. Any reinsurance losses are expected to fall within budget estimates for most reinsurers," Mr. Magarelli said.
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