Fitch Ratings says it believes that the global reinsurance industry has sufficient capital to absorb expected losses from Hurricane Sandy, and so, it doesn’t anticipate major credit downgrades as a result.

Due to the scale and complexity of the event, Fitch says the ultimate level of insured losses remains highly uncertain. While catastrophe modeler EQECAT, Inc. has put insured losses in the range of US$10 billion to US$20 billion, it notes that AIR Worldwide’s estimated insured industry loss is about US$10 billion, with a likely uncertainty interval of US$7 billion to US$15 billion. However, catastrophe modeler Risk Management Solutions has refrained from providing an industry loss estimate, stating any estimate at this time is potentially unreliable.

Nevertheless, Fitch says that, based on the initial estimates, losses from Sandy will likely rank near the US$13 billion of insured losses from Hurricane Ike in 2008, which was the last hurricane to significantly affect the reinsurance industry. Previously, Fitch has estimated that losses from a single event would need to exceed US$60 billion to likely trigger a reinsurance sector outlook revision to negative from stable.

If the current loss estimates from EQECAT and AIR are consistent with actual losses, Fitch says the storm is not likely to be a market-changing event that would cause reinsurance pricing to increase significantly. Prior to Sandy, rate changes were anticipated to trend moderately in the range of down 5% to up 5%, it says. With the additional losses from Sandy, a decline in rates is less likely; however any significant rate increases should be restricted to the loss affected lines in the Northeast U.S. region, it says.

“We view the reinsurance sector’s capital position as solid, as a lower level of catastrophe losses posted thus far in 2012 have allowed companies to recover from the record catastrophe losses in 2011,” it notes. “With the added losses from Hurricane Sandy, the industry will likely continue to exercise caution with regard to capital management activity. As a result, we expect share repurchase activity to remain muted until reinsurers have a better indication of actual losses.”