Private Market, Florida Cat Fund Can Take Tepid Hurricane Season: Fitch

Despite suffering declines in surplus and shareholder equity from 2011 catastrophes, insurers and reinsurers have enough underwriting capacity to withstand a forecasted “below average” 2012 Atlantic Hurricane season, according to a report from Fitch Ratings.

“Sufficient capacity remains available in the (re)insurance markets to meet the demand for coverage prior to the approaching U.S. hurricane season,” Fitch says is a statement. “Early forecasts for the 2012 U.S. hurricane season predict that the North Atlantic Basin will likely produce below-average hurricane frequency relative to long-term results, as a number of environmental forces that serve to stifle the development of tropical storm activity appear more prevalent at this point in 2012 than in many recent years.”

Fitch adds that while 2011 catastrophes drained insurance balance sheets, “sufficient underwriting capacity remains available in the (re)insurance markets.” The statement also says that traditional insurance coverage – which has been fortified by a strong renewal season – has also been supplemented by $1.5 billion in catastrophe bond issuance in the first quarter.

“Each factor has served as a catalyst for positive pricing movement in the U.S. property insurance market, specifically in regions and lines of business with significant catastrophe exposure,” the report concludes.

Separately, Fitch affirmed the “AA” rating of the Florida Hurricane Catastrophe Fund (FHCF), citing the fund’s “strong” liquidity and its ability to dominate state’s weakened property insurance market.

“The Florida insurance market continues to be somewhat unstable and vulnerable. Many larger, financially stronger insurers have either stopped writing new policies or are completely exiting the market, shifting the risk to the smaller, thinly capitalized, Florida-only insurers that are mostly unrated or low rated,” the statement said.


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