US Insurers' Capital Levels Sufficient To Withstand Hurricane Season

Beach with red warning flag, rough waves, debris, broken pier, and storm clouds

June 13, 2022

Beach with red warning flag, rough waves, debris, broken pier, and storm clouds

While current economic conditions present challenges to US property-casualty insurers in terms of addressing hurricane losses, their existing capital is sufficient to withstand this year's hurricane season, according to Fitch Ratings.

The rating agency noted that the sharp increase in inflation and the potential for stagflation do present additional challenges to US property-casualty insurers in the event of a landfall hurricane.

"Natural catastrophe losses, particularly severe weather-related events, represent a major source of loss volatility, but capital levels of large (re)insurers should absorb near-term large insured losses from an individual hurricane or other catastrophic event," a Fitch statement said.

Fitch noted that after two very active hurricane seasons, forecasts for this year's Atlantic hurricane season again call for above-average hurricane frequency.

"Capital strength provides insurers with an ability to withstand losses from large adverse events, including catastrophes," the Fitch statement said. "Industry policyholders' surplus (PHS) increased by 40 percent over the last 3 years and now exceeds $1 trillion."

The rating agency currently has a neutral sector outlook on the US property-casualty insurance industry and the global reinsurance sector.

"Capital strength of (re)insurers should allow them to absorb near-term large insured losses from an individual hurricane or other catastrophic event, but a confluence of large events in a short period may lead to capital reductions and ratings pressures," Fitch said.

June 13, 2022