News Column

Fitch: Hawaiian Hurricanes Manageable for P/C and Cat Bond Mkts

August 8, 2014



CHICAGO--(BUSINESS WIRE)-- Insured losses from two hurricanes that have approached Hawaii appear to be manageable, but could depress third-quarter 2014 earnings for the largest primary writers in the state, according to Fitch Ratings.

The companies with the five largest homeowners exposures to these events, as measured by statutory direct written premium include State Farm Group, USAA Group and Allstate Insurance Group, as well as Hawaii focused insurers Zephyr Insurance Company and First Insurance Co of Hawaii.

In commercial lines, when combining the statutory direct written premiums for inland marine, commercial multiperil (nonliability) and allied lines, the companies with the largest market share in Hawaii include First Insurance Co. of Hawaii, American International Group, Fireman's Fund Group, Centauri Specialty Insurance Co. and Liberty Mutual Insurance Group.

While there are numerous outstanding catastrophe bonds that include Hawaii in their exposure to hurricane/named storm risk, given the current forecasts for the two storms and the relatively small insured loss expectations from the events, Fitch does not expect losses to materialize for any currently outstanding catastrophe bond.

Two separate storms have approached the Hawaiian Islands in recent days and are expected to bring considerable rainfall and wind to the island chain. However, material insured losses are not expected to result from the storms given their current paths.

Hurricane Iselle reached as high as a Category 4 hurricane, meaning it sustained wind speeds of over 130 mph, before being downgraded to a Category 1 hurricane and ultimately a tropical storm as it approached the Hawaiian Islands.

Hurricane Julio followed Iselle by several hundred miles and is expected to take a more northern path around the islands than its predecessor and bring additional rainfall to the islands, but avoid a significant landfall event. In the event of a more southern trajectory for Julio, the potential for insured losses would increase, but would likely remain manageable for the (re)insurance industry.

Major hurricane events in Hawaii have been a rare occurrence in recent history, but these two storm events may well serve to remind the insurance industry of the potential for material natural catastrophe losses that exists in the state.

The last hurricane event to significantly affect Hawaii came in 1992, when Hurricane Iniki made landfall with considerably higher intensity than what is currently being experienced with Iselle and Julio. On the 20th anniversary of Iniki in 2012, catastrophe modeling firm AIR Worldwide estimated that if Iniki occurred at that time, the storm would have generated more than $3 billion in insured losses.

The above article originally appeared as a post on the Fitch Wire credit market commentary page. The original article can be accessed at www.fitchratings.com. All opinions expressed are those of Fitch Ratings.

ALL FITCH CREDIT RATINGS ARE SUBJECT TO CERTAIN LIMITATIONS AND DISCLAIMERS. PLEASE READ THESE LIMITATIONS AND DISCLAIMERS BY FOLLOWING THIS LINK: HTTP://FITCHRATINGS.COM/UNDERSTANDINGCREDITRATINGS. IN ADDITION, RATING DEFINITIONS AND THE TERMS OF USE OF SUCH RATINGS ARE AVAILABLE ON THE AGENCY'S PUBLIC WEBSITE 'WWW.FITCHRATINGS.COM'. PUBLISHED RATINGS, CRITERIA AND METHODOLOGIES ARE AVAILABLE FROM THIS SITE AT ALL TIMES. FITCH'S CODE OF CONDUCT, CONFIDENTIALITY, CONFLICTS OF INTEREST, AFFILIATE FIREWALL, COMPLIANCE AND OTHER RELEVANT POLICIES AND PROCEDURES ARE ALSO AVAILABLE FROM THE 'CODE OF CONDUCT' SECTION OF THIS SITE. FITCH MAY HAVE PROVIDED ANOTHER PERMISSIBLE SERVICE TO THE RATED ENTITY OR ITS RELATED THIRD PARTIES. DETAILS OF THIS SERVICE FOR RATINGS FOR WHICH THE LEAD ANALYST IS BASED IN AN EU-REGISTERED ENTITY CAN BE FOUND ON THE ENTITY SUMMARY PAGE FOR THIS ISSUER ON THE FITCH WEBSITE.



Fitch Ratings

Christopher A. Grimes, CFA, +1 312-368-3263

Director

Fitch Ratings, Inc.

70 W. Madison Street

Chicago, IL 60602

or

Brian C. Schneider, CPA, CPCU, ARe, +1 312-606-2321

Senior Director

Insurance

or

Matthew Noll, +1 212-908-0652

Senior Director

Fitch Wire

33 Whitehall Street

New York, NY

or

Media Relations:

Brian Bertsch, +1 212-908-0549

brian.bertsch@fitchratings.com

Source: Fitch Ratings


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