North America

Not enough to drive change in market rates

Insurance sector advisory firm, Deloitte believes that that Hurricanes Fay, Gustav and Ike were not large enough to drive a change in the market rates. Deloitte insurance partner Lis Gibson said it would take a further one or two major hurricanes in populous areas and total losses of at least $30-50bn in order for the market to change direction away from the current softening. “The usually expected hasty influx of new capital will likely be impeded by the credit crunch. Established insurers and reinsurers will struggle to rebuild their balance sheets if they are particularly hit by a catastrophe, while there may be less capital available for new insurers,” Ms Gibson said. However, Deloitte warned that this year’s hurricane season could shape up to rival the 2005 season. The firm referred to estimates of insured losses from Hurricane Ike which were put as high as $25bn. The National Hurricane Centre expected Hurricane Ike to intensify and make landfall as a Category 3 hurricane with winds approaching 115 mph. For Deloitte, the question remained about whether insurers and reinsurers have improved their exposure management enough after Hurricanes Katrina, Rita and Wilma in 2005 when, according to Deloitte, most risk models failed to allow properly for the sharp increase in repair costs after a major event.