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Industry can handle Florence losses: S&P

US insurers and the global reinsurance sector are strong enough financially to manage the losses from Hurricane Florence, S&P Global Ratings says.

Florence made landfall on Saturday as a Category 1 storm in North Carolina but has been downgraded to a tropical depression as it unleashes extremely heavy rain on North Carolina and South Carolina.

“Wind-related damage and the associated storm surge are likely to be major causes of insured losses emanating from property lines, business interruption, and auto damage among others,” S&P says.

“As well, there’s an increased risk of inland flooding from the slow-moving storm. Primary insurers will likely take the brunt of losses, but it’s not a complete washout.”

While initial loss estimates are still being tabulated, S&P believes the eventual figure is more likely to be an “earnings event” with limited impact on the industry’s capital position.

“Although the individual impact will vary among (re)insurers, we expect the credit risk profile will be largely unchanged after this event,” the ratings agency says.

“We expect Florence to have minimal ratings impact on reinsurers. We expect the combined losses from Florence and other year-to-date natural catastrophe events to be fully contained within the sector’s annualised earnings.”