Moderate El Nino, softer hurricane outlook cushion already-stable P&C insurance: Fitch

Fitch Ratings’ latest hurricane outlook notes early forecasts for the 2014 hurricane season suggest conditions that could decrease the probability of a major loss-inducing storm impacting the insurance industry.

The forecasts indicate that moderate El Nino conditions are likely to persist throughout the year, meaning “this 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 Ratings noted in a statement late last week announcing the availability of the ninth edition of its Hurricane Season 2014: A Desk Reference for Insurance Investors.

“Fitch estimates that given the current substantial 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 for consideration of a property/casualty sector outlook movement to negative tied to catastrophe experience,” the statement explains.

“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,” Christopher Grimes, a director for Fitch Ratings, says in the statement.

“The capital markets remain a strong and growing presence in the market for underwriting and offering protection from catastrophe risks,” the statement notes. “The continued low interest rate environment, along with the desire of (re)insurance companies to utilize alternatives to the traditional insurance risk transfer market, has generated significant growth in new capital from third-party investors,” the press release adds.

The hurricane report provides analysis on the potential effects of a major storm season on large insurance companies and the industry as a whole. The report also compares forecasts for the 2014 hurricane season from several market experts, including National Oceanic and Atmospheric Administration, Colorado State University and Tropical Storm Research.