Windstorm Losses Hitting French Insurers Hard
Earnings of French reinsurers and carriers will deteriorate in the coming months as losses pile up from February’s Windstorm Xynthia, according to a commentary from Standard & Poor’s .
“Given Xynthia’s severity — most insurers are estimating losses in excess of their net retention levels — ,reinsurers will likely also be affected,” the commentary from S&P analysts Gauthier Bollini and Lotfi Elbarhdadi says. “This, in turn, may trigger hikes in reinsurance rates, resulting in an additional drag on insurers’ prospective profitability.”
Windstorm Xynthia struck with 100 mile an hour winds on February 28th and caused an estimated EUR1.5 billion in damage in France alone. Damage was also reported in Belgium, Germany, Portugal and Spain
Over 60 people were also killed in the storm, according to published reports.
Approximately EUR250 million of the losses from Xynthia will be absorbed by the state-backed reinsurer Caisse Centrale de R’assurance (CCR). However, the S&P commentary notes that CCR only covers natural catastrophes such as floods, droughts, earthquakes, and hurricanes and excludes windstorm losses which are the costliest portion of the claims from the storm.
Losses themselves from Xynthia will not cause the ratings firm to downgrade any domestic property and casualty insurers in the immediate future but the analysts warn continued earnings pressure could change depending on how firms and rates react.
“Although we believe that the Xynthia windstorm in isolation is unlikely to lead us to revise our ratings on P/C players in France, it compounds our view of these companies’ already pressured earnings in what we continue to see as soft market conditions,” S&P says.
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