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TMCNet:  Best's Briefing: Hurricane Florence Imperils Single-State Property Insurers in the Carolinas

[September 13, 2018]

Best's Briefing: Hurricane Florence Imperils Single-State Property Insurers in the Carolinas

A.M. Best's analysis shows that the top companies exposed to property catastrophe risks in North Carolina and South Carolina that are likely to be affected by Hurricane Florence possess a strong level of risk-adjusted capitalization. However, according to a new briefing, single-state writers in these sates could see considerable gross losses relative to surplus depending on the severity and location of the storm.

The Best's Briefing, "First Look: Hurricane Florence," notes that the market share of the large national writers such as State Farm, Nationwide and Allstate, is considerable in the states in Hurricane Florence's path, but the size of their portfolios in relation to policyholders' surplus is relatively small. The briefing includes Top 10 lists of companies in North Carolina, South Carolina and Virginia whose direct written premiums in the state represent the highest percentage of the companies' total direct written premiums.

A compounding factor is the increased population and development in the area since the Hurricane Hugo in 1989, the last major storm to strike the Carolinas. Given the size and intensity of Hurricane Florence's winds and the expected, resulting storm surge, losses have the potential to be significant. Personal lines and small commercial lines insurers are likely to experience the majority of losses; however, should the storm maintain strength inland, it could reach the technology centers of Raleigh, Durham and Chapel Hill, where commercial exposure is considerable.

A.M. Best does not expec the direct losses to threaten the financial health of most insurers, given the robust nature of the current reinsurance programs most companies have in place. The considerable level of protection is owed to prior years of favorable reinsurance market conditions, which supplied primary carriers with favorable terms and ample top-limit protection. Additionally, improvements over the last decade in overall risk management capabilities, including exposure analysis, data availability surrounding risk characteristics and greater granularity in pricing likely will play a role in mitigating losses associated with this event.

Most reinsurers will experience losses from Hurricane Florence due to the highly syndicated nature of property catastrophe business, and the potential exists for losses to impact alternative capacity on a reinsurance and retrocessional basis as its participation in the sector has increased year over year. However, it is A.M. Best's belief that unless losses are materially outside of expectations or followed up by subsequent large catastrophic losses, it is unlikely to see any meaningful market hardening outside of loss-affected areas.

A.M. Best will closely monitor the situation and evaluate Hurricane Florence's impact in the context of its loss expectations. Although company loss estimates will take time to determine, all A.M. Best-rated entities are expected to provide preliminary estimates and/or ranges of their potential losses within a reasonable timeframe. These loss estimates should include any potential effects and take into account the involvement of any government-specific wind and beach residual market mechanisms when applicable.

To access the full copy of this briefing, please visit

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