Catastrophic flooding currently hammering Australia will not change local insurers’ creditworthiness in the near term, according to a report issued Wednesday by Standard & Poor’s.
Specifically, the rating agency said that it expects local carriers including Suncorp, Insurance Australia Group (IAG) and QBE Insurance to retain current credit ratings between A+ and A– since current flood claims estimates fall within existing reinsurance agreements.
“While the anticipated substantial claims costs will worsen Australian insurers’ earnings for fiscal 2011 to varying degrees, the insurers’ generally strong capital positions and extensive reinsurance protection would limit any downward rating pressure,” S&P said in the report.
According to S&P, claims from the Australian floods are estimated between A$500 million to over A$1 billion.
The report adds that Suncorp is “the most exposed” flood claims because of their large personal insurance book and flood coverage in Queensland. S&P says Suncorp estimates the cost of flooding could be limited to about A$360 million, but A$14 billion in net assets and multiple reinsurance arrangement will cushion losses.
IAG has lower market share in Queensland and its standard policies do not cover flood damages, S&P says, adding that “IAG’s reinsurance protection would limit its exposure under worst-case scenarios.”
The floods do not appear to be a “material” for QBE since the insurer has less limited a personal lines. However, the report explains that QBE is exposed to commercial and mining in Queensland.
Torrential downpours have been inundating the continent since early December, mainly in the country’s Queensland region.
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