Ratings firm Fitch has warned that the threat from the 2020 Hurricane season is likely to be compounded by the current impact of the global COVID-19 pandemic.
The firm has issued its annual hurricane season report amid predictions that 2020 will see an above average number of windstorms. It warns the continuation of the coronavirus pandemic into hurricane season is likely to compound these challenges if a major event occurs in 2020.
“In the event of a major hurricane landfall in 2020, property insurers’ claims assessment and settlement expertise will be tested by reductions in economic activity and mobility resulting from public policy efforts to combat the pandemic,” said Christopher Grimes, Director, Fitch Ratings. “Typical disaster response practices to prevent injuries and losses from an oncoming storm, including evacuation and mass sheltering plans will need to be re-evaluated in light of public health concerns.”
The report warns a variety of meteorological forecasting teams have published annual hurricane season forecasts, with a consensus opinion that current environmental conditions will likely yield above-average hurricane activity. “Natural catastrophe losses, particularly severe hurricane-related events, represent a major source of loss volatility to property/casualty (P/C) insurers, and one isolated large hurricane could have a significant effect on industry capital”, it added.
Fitch currently has a negative sector outlook on the P/C and global reinsurance sectors, reflecting “coronavirus uncertainty and near-term market conditions and profitability challenges”. Potential effects on capital and operating challenges related to the pandemic add incremental vulnerability to insurers from near term catastrophe events. Still, industry capital strength remains very strong, providing most individual re/insurers with an ability to absorb near-term large insured losses.
“The coronavirus pandemic creates unique challenges for the re/insurance industry during the 2020 hurricane season, but the industry remains well positioned to absorb the risk of an above-average season,” added Mr Grimes.
“Pricing remains favourable on U.S. hurricane-exposed primary property business, reflecting heightened loss activity in recent years,” said the report. “In the reinsurance market, pricing has experienced considerable firming at the midyear 2020 reinsurance renewals, reflecting heightened risk in the region, recent adverse loss experience and reductions in available capacity on offer.”