Hurricane Wilma==which by some estimates may have inflicted a $12 billion insured loss==will put financial pressure on insurers and reinsurers but not enough to badly damage carriers' credit, according to Moody's Investors Service.
In a new report, the New York-based rating firm said that insurers are much better prepared for Florida catastrophes than other states, noting that carriers with business there have reduced exposure through exclusions, restrictions and increased deductibles.
In its report=="Hurricane Wilma: A Fast Moving Storm With Significant Impact to the Property & Casualty Insurance Industry"==Moody's also mentioned there is significant reinsurance capacity through the state-run Florida Hurricane Catastrophe Fund that backstops property insurers.
Damage severity is also lessened by tougher building codes promulgated after the 1992 Hurricane Andrew catastrophe.
"Moody's does not expect to take widespread rating actions, but the likelihood of individual rating actions has increased given the continuing event frequency and the attendant upward revisions of insured losses from prior storms," said a senior analyst, Pano Karambelas.
The report observed that a number of property-casualty companies have already recapitalized following losses from Hurricanes Katrina and Rita, in order to replace lost capital and to ensure that they have sufficient capital to write additional business as pricing improves.
However, Mr. Karambelas wrote that "receptivity for any additional capital raises from companies that have already recapitalized following the losses of earlier storms may have weakened."
Moody's report noted that a meaningful portion of the losses would be sustained by Citizens Property Insurance Corp., the state-created insurer of last resort.
The firm said that because of the continuing damage assessment remaining from Hurricanes Katrina and Rita, "adjusting resources are close to capacity."
According to the report, coverage disputes related to the two earlier hurricanes are likely to result in delays on Wilma claims.
The combined result of this season's four hurricanes is that reinsurance and retrocessional pricing for property-catastrophe insurance will rise more sharply than primary pricing.
Moody's said it believes reinsurers are reevaluating their exposures, which will likely cause a shortage of retro capacity, and cause insurers and reinsurers to consider additional options such as catastrophe bonds, joint ventures and collateralized products from hedge funds.
"As companies make announcements of their estimated losses over the coming weeks, Moody's will evaluate the impact, if any, of the hurricane losses in the context of the earnings capacity and capitalization for each insurance company" Mr. Karambelas said.
Despite the extraordinarily destructive effects of the last three hurricanes, Moody's said it believes that the credit strength of the p-c industry generally remains good.
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