COVID-19 Pandemic Could Complicate Hurricane Season for Insurers
June 04, 2020
In its annual hurricane season report, Fitch Ratings suggests that the COVID-19 pandemic's continuation into this year's hurricane season is likely to increase the challenge for insurers if a major storm occurs.
"In the event of a major hurricane landfall in 2020, property insurers' claims assessment and settlement expertise will be tested by reductions in economic activity and mobility resulting from public policy efforts to combat the pandemic," Christopher Grimes, director, Fitch Ratings, said in a statement. "Typical disaster response practices to prevent injuries and losses from an oncoming storm, including evacuation and mass sheltering plans, will need to be re-evaluated in light of public health concerns."
Fitch Ratings noted that the consensus of the various hurricane season forecasts prepared by meteorological forecasting teams is that current environmental conditions will likely yield above-average hurricane activity this year.
"Natural catastrophe losses, particularly severe hurricane-related events, represent a major source of loss volatility to property-casualty (P&C) insurers, and one isolated large hurricane could have a significant effect on industry capital," the rating agency said.
Fitch currently has a negative outlook on the P&C and global reinsurance sectors, reflecting coronavirus uncertainty and near-term market conditions and profitability challenges. The COVID-19 pandemic's potential effects on insurer capital and operating challenges add incremental vulnerability from near-term catastrophe events, Fitch said. Industry capital remains strong, however, providing most insurers and reinsurers the ability to absorb near-term large insured losses, the rating agency said.
"The coronavirus pandemic creates unique challenges for the (re)insurance industry during the 2020 hurricane season, but the industry remains well positioned to absorb the risk of an above-average season," said Mr. Grimes.
June 04, 2020