Early forecasts for the 2014 hurricane season indicate that it could be a relatively calm season, which would be good for the insurance industry, according to Fitch Ratings.
The rating agency reports that moderate El Nino conditions are expected to persist throughout the year, which it says could “inhibit tropical storm formation in the North Atlantic basin and decrease the probability of a major loss-inducing storm impacting the insurance industry.”
Fitch estimates that given the current level of industry capitalization, it would likely take a record individual storm loss, or a series of significant losses, equal to 15% or more of industry aggregate surplus, to impact the credit outlook for the property & casualty sector.
“From the perspective of the insurance industry, the intensity and location of storms making landfall are the most critical variables,” notes Christopher Grimes, director at Fitch. “While fewer and less severe storms bode well for the industry, the property/casualty segment remains positioned to withstand the impact of future significant events.”