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Q3 cat bill may pass $127 billion

Insured catastrophe losses for the third quarter may exceed $US100 billion ($127 billion), with reinsurers likely to take the biggest hit, according to S&P Global Ratings.

The ratings agency has revised its outlook on the Lloyd’s market to negative from stable, and also adjusted its assessments on others.

“As reinsurers are coping with their third-quarter catastrophe-related losses, their capital could take a hit,” S&P says. “Although our ratings are supported by robust capital adequacy levels, we would consider a reinsurer that incurs large losses that translate into capital erosion as an outlier that could be subject to a negative rating action.”

S&P analysis indicates a one-in-50-year catastrophe shock would cost reinsurers about $US35.9 billion ($45.6 billion) on a pre-tax basis.

The group of 20 reinsurers featured in the analysis made about $US18 billion ($22.9 billion) in net income last year.

S&P says US property and casualty insurers’ credit will likely be resilient, despite damage from the most active Atlantic hurricane season in recent years.

The sector is well capitalised, with record high surplus levels of $US709 billion ($900 billion) at March 31 to absorb losses.

“So far, we are not taking any rating actions on US primary insurers as a result,” S&P says.

“Any rating actions we might take won’t be solely because of these hurricane catastrophe losses, but will be in conjunction with insurers’ capital deployment plans.

“We will monitor the evolution of losses and could take actions progressively if warranted.”

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