Best’s Commentary: Growing Gulf Coast-Focused Insurers Face Key Test in Hurricane Francine
14 September 2024 - 8:45AM
Business Wire
AM Best expects the bulk of losses resulting from
Hurricane Francine to be manageable and borne by primary insurers
given a shift toward higher reinsurance attachments, but companies
focused on growing business in Gulf Coast states will face a key
test as claims materialize.
The Best’s Commentary, “Growing Gulf Coast-Focused Insurers Face
Key Test in Hurricane Francine,” noted that a trend toward higher
attachments were part of de-risking measures by reinsurers that
followed Hurricane Ian in 2022. In the case of Hurricane Francine,
the landfall location in a more sparsely populated section of
Louisiana should limit the economic impact. This hurricane is also
being considered more of a flooding event than a wind event, which
could also temper the volume of insured losses.
“However, there could be pockets of concentrations in which
insurers with higher dependence on reinsurance could see greater
impacts, which will take time to determine,” said Jason Hopper,
Associate Director, AM Best.
Half the 10 costliest hurricanes to impact the U.S. based on
insured losses have occurred since 2017; Florida, Texas, and
Louisiana have been impacted by eight of them. AM Best has
identified 72 companies whose total direct property catastrophe
risk premium written in the five Gulf Coast states—Texas,
Louisianna, Mississippi, Alabama, and Florida—equates to more than
two-thirds of their total direct premium. These companies,
described in the report as Gulf Coast property catastrophe
specialists, have been capturing a greater share of Gulf Coast
property catastrophe net premium written over the past five years,
accounting for about 20% of this regional market. The level of
premium ceded to reinsurers by this group has more than doubled
since 2020.
As reinsurance becomes more expensive in the Gulf Coast region,
managing counterparty risk remains an important component of a
comprehensive enterprise risk management framework, according to
the report. Approximately About 27% of the premiums ceded by the
Gulf Coast property specialists is ceded to reinsurers domiciled in
Bermuda, of which more than half goes to reinsurers that are not
rated by AM Best.
To access a complimentary copy of this commentary, please visit
http://www3.ambest.com/bestweek/purchase.asp?record_code=346749.
AM Best is a global credit rating agency, news publisher and
data analytics provider specializing in the insurance industry.
Headquartered in the United States, the company does business in
over 100 countries with regional offices in London,
Amsterdam, Dubai, Hong Kong, Singapore and Mexico City. For more
information, visit www.ambest.com.
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Jason Hopper Associate Director, Industry
Research & Analytics +1 908 882 1896
jason.hopper@ambest.com
Christopher Sharkey Associate Director, Public
Relations +1 908 882 2310
christopher.sharkey@ambest.com
Richard Attanasio Senior Director +1 908 882
1638 richard.attanasio@ambest.com
Al Slavin Senior Industry Research Analyst +1
908 882 2318 al.slavin@ambest.com