A month into the official hurricane season, tropical storm Alex has already spawned hurricane watches for Texas and Mexico.  As property/casualty insurers brace for this first named storm and the prediction of more than 20 others, financial stability is taking center stage as the industry faces the possibility of tens of billions of dollars in claims, notes specialty property writer FM Global.

In fact, U.S. property/casualty insurers have sufficient capitalization to withstand a potentially strong hurricane season, despite a slight drop in pricing, according to FM Global. FM Global points to a report from Fitch Ratings this month found the financial stability of the industry has been solid in the last 10 years, despite numerous challenges.

"The global property insurance industry is well capitalized at the moment following strong underwriting results from a successful 2009 for insurers, and recovering financial markets," Ruud Bosman, vice chairman of the board of directors of FM Global, told Reuters in an interview.

As such, the industry would be able to deal with a busy hurricane season, or any significantly sized storms, he said.

"The industry's growth rate in premiums and capital has been relatively slower than the past, but Fitch believes this reflects the industry's maturity, as well as the relatively low economic inflation of the past decade," said the report, which examined financial performance for the property/casualty insurance industry and the 25 largest market participants on a statutory basis over the past 10 years.

"If you compare the industry today with it 15 to 20 years ago, we have much more knowledge about the impact of large events—the notifications of an upcoming event are better and the impact of an event can be minimized through structural and engineering work," he said, citing February's Chilean quake as an example of a major catastrophe the impact of which was reduced because of the country's earthquake-resistant construction codes.

Overall insured losses to local insurers from the magnitude-8.8 quake were limited as the result of well-established risk-transfer arrangements and catastrophe-protection tools, as well as the mandated earthquake reserves set aside by all property and casualty insurers.

"The same applies to a hurricane event," said Bosman.

The 2009 season only had three hurricanes and was the quietest year since 1997. Many P&C insurers, including Chubb, CNA Financial Corp. and FM Global posted strong results in 2009, gaining from lower catastrophe losses.

Property pricing has flattened since 2008, and Bosman said he expected it to remain the same through 2010.

"Prices have moved down by around 5% in property lines," he said, adding that only a major catastrophe of $35 billion or more would affect the market.

Prices for property coverage increased by as much as 20% after hurricanes Ike and Gustav left insurers with huge claims in 2008.

Private forecaster WSI expects the 2010 Atlantic hurricane season to produce at least 20 named storms, including 11 hurricanes and five intense hurricanes of category 3 or greater.

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