Two rating agencies say Hurricane Ike will mean material losses for the insurance industry, but not necessarily enough to alter the current soft market direction.
Yesterday, Standard & Poor's and Fitch Ratings put out papers acknowledging that the losses from Ike, along with other tropical storms this season, could mean a downside in earnings for the industry.
"We believe the aggregate catastrophe losses from these successive storms are earnings events for the industry rather than capital events," S&P said.
Catastrophe modelers have given insured loss estimates for Hurricane Ike of between $6 billion and $18 billion. The storm struck the Texas Gulf coast on Saturday, then continued up into the Midwest.
S&P noted that the storms, as well as poor investment returns and investment write-downs, are contributing to a troubled financial picture for the industry, and could affect ratings or outlooks in the future.
Fitch Ratings said it believes losses from Ike will add one-to-four-points to the 2008 U.S. statutory combined ratio, which is expected to exceed 100.
Fitch warned that while the industry will not see a material deterioration, the possibility for smaller insurers, especially those with concentrated geographic focus, could be materially affected.
Fitch also noted that because Ike was a Category 2 storm when it hit Texas, it would not trigger catastrophe bonds.
Both S&P and Fitch said Ike would not alter the current property-casualty pricing decline, but S&P did say that it would probably stabilize the property-catastrophe market. S&P also said that primary insurers would probably bear the brunt of the losses because reinsurance aggregates would not be triggered.
The Consumer Federation of America said today that wind damage claims would roughly number 300,000, federal flood claims would reach 175,000, with total damages exceeding $14 billion.
J. Robert Hunter, director of insurance for CFA, said families will have to pay more of the cost for their losses because of increases in deductibles and other policy limitations.
Ike is expected to make the top-10 list of hurricane losses, possibly surpassing Wilma in 2005.
Meanwhile, although no new loss figures were available, Gustav still remains on the radar of insurer.
Today, Flagstone Reinsurance Holdings Ltd., based in Hamilton, Bermuda, expects its exposure to Gustav to be approximately $30 million and exposure to Ike to be $55 million. The numbers are based on its own modeling analysis.
For its part, Insurance Services Office subsidiary Property Claim Services said it expects to have a preliminary industrywide insured damage estimate on Hurricane Gustav before the end of the week.
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