Business interruption will determine size of Hurricane Fiona losses
AM Best anticipates carriers will be able to manage losses in Puerto Rico and the Dominican Republic stemming from Fiona.
The duration that businesses are down due to power outages is expected to have an outside impact on losses related to Hurricane Fiona, according to AM Best, which noted the causes of loss — be it flood, wind or mudslide — will also be a determining factor.
While it is uncertain how the storm will impact ratings, AM Best anticipates carriers will be able to manage the losses.
Overall, Fiona is expected to have a bigger impact on the Puerto Rican market, as the hurricane hit a region of the Dominican Republic that has lower levels of insurance distribution. AM Best reported losses from damage caused by wind and falling trees will have the biggest impact on primary insurers.
The situation in Puerto Rico is a bit trickier due to a high level of market concentration among a handful of companies. The top 10 insurers in the territory hold more than 90% of the market share. Further complicating matters, just two of those companies —Chubb INA Group and AIG — are what AM Best considers well diversified. The remaining six companies all have 100% of their exposure concentrated in Puerto Rico. Those six companies combine to account for around 43% of the market share in personal lines and commercial property lines in Puerto Rico.
“It could take some time for claims adjusters in Puerto Rico to assess and estimate damages,” David Blades, associate director, industry research and analytics, said in a release. “However, since Hurricane Maria in 2017, insurance companies on the island have taken significant action to manage their risk profiles better by tightening underwriting guidelines, sharpening risk management techniques, improving pricing and getting significant rate increases.”
Most losses stemming from Fiona will be flood related and will fall under the National Flood Insurance Program instead of standard policies, Blades added. As most losses will be caused by floods, AM Best projects that Hurricane Fiona will be an earnings event for the insurance industry.
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