- Storm is forecast to make landfall in Florida on Friday
- Hurricane may not materially affect pricing, KBW analyst says
Hurricane Hermine, which is poised to land in Florida Friday, may result in “manageable” losses for the insurance industry, according to Keefe Bruyette & Woods analyst Meyer Shields.
The storm is forecast to hit northwest Florida, a region of the state with lower insured property value, Shields wrote in a note to clients Thursday. Potential losses would be greater if the storm were to strike more-populated areas of the state, he said.
“We think the insurance industry can easily absorb a $15 billion catastrophe loss without generating a negative quarterly return,” Shields said in the note. “Given the preliminary expected loss potential for Hermine and its path trajectory, we don’t anticipate the storm to materially affect pricing trends.”
Hermine’s winds reached 75 miles (121 kilometers) per hour Thursday afternoon, a Category 1-strength storm, and could become the first hurricane to hit Florida since Wilma in 2005, according to the U.S. National Hurricane Center. Surge from the storm could be an issue for commercial insurers in the region, Shields said.
Citizens Property Insurance Corp., the government-owned insurer of last resort, along with Universal Insurance Holdings Inc. and Tower Hill Group are the biggest writers of property coverage in Florida, Shields said. State Farm Mutual Automobile Insurance Co., Allstate Corp. and Nationwide Mutual Insurance Co. are the largest in the U.S. Southeast.
Reinsurers, which help take on risks from primary carriers, have been struggling with softer pricing as alternative capital floods the market and a lack of storms forces rates even lower. Hermine probably won’t affect pricing in that industry, according to risk modeling firm RMS.
“Initial indications are that Hermine will not cause a major insurance industry loss and that this is unlikely to be an event that has a meaningful impact on soft reinsurance market conditions,” Ben Brookes, a vice president of capital markets at RMS, said in an e-mailed statement. “There’s likely to be no significant impact to the catastrophe-bond market.”