Based on preliminary assessments from Fitch Ratings, the global reinsurance industry's strong capitalization can absorb expected losses from Hurricane Sandy. Furthermore, Fitch does not anticipate substantive negative rating actions as a result of this event, as a lower level of catastrophe losses posted thus far in 2012 have allowed companies to recover from the record catastrophe losses in 2011.
This comes despite the fact that, due to the scale and complexity of the event, the ultimate level of insured losses remains highly uncertain. In previously published research reports, Fitch’s assessment has been that losses from a single event would need to exceed $60 billion to likely trigger a reinsurance sector outlook revision to Negative from Stable.
Insured industry losses from Hurricane Sandy are estimated by catastrophe modeler EQECAT to be in the range of $10 billion to $20 billion. This is somewhat higher than AIR Worldwide's estimated insured industry loss to onshore U.S. property exposures of near $10 billion. However, catastrophe modeler Risk Management Solutions (RMS) has thus far refrained from providing an industry loss estimate.
Based on the initial estimates provided, losses from Sandy would rank near the $13 billion insured losses from Hurricane Ike in 2008, the last hurricane to significantly affect the reinsurance industry. However, the estimated Sandy losses would be less than the record $48 billion for Hurricane Katrina in 2005 and inflation adjusted $25 billion from Hurricane Andrew in 1992.
Fitch expects that as industry losses reach $10 billion and higher, the reinsurance industry will receive a greater share of losses.
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