How will Hurricane Florence affect reinsurance in Canada?
Published: September 13, 2018
Hurricane Florence is barrelling towards the Carolinas and the southwestern United States with plenty of might between her. A massive storm, Florence is gathering strength and while only a category 2 hurricane (from 5 categories and downgraded from category 4), she has been deemed a killer and is likely to cause massive damage.
As this year’s hurricane season moves into high gear, some parts of the United States are still recovering from last years giant storms, Harvey, Irma and Maria. Those record-breaking events put huge pressure on the reinsurance industry and with Florence looming many are left wondering if there is reinsurance capacity to cope with the fallout.
Due to the area Florence is affecting, many are predicting this to be the “storm of a lifetime” and likely to cause massive damage. Could the tumbling effect of over capacity in U.S. reinsurance lead to a rate increase in Canada?
Speaking to Canadian Underwriter this week, Glenn McGillivray, managing director for the Institute for Catastrophic Loss Reduction said a snowball effect is unlikely:
“We will have to see how the storms that are in line behind Florence play out, but for now, there is way too much capital in the reinsurance and [insurance-linked securities] markets to see any significant changes in rate,” McGillivray said.
Aon Benfield’s global capital estimated for reinsurance suggest there is US$600 billion in the market (based on Sept. 30 2017 data). McGillivray believes Florence will not have a major impact on reinsurance renewals. He points to last year’s record-breaking hurricane season to highlight how robust the reinsurance market is:
“Last year’s record for cat losses barely made a dent on renewals and this year could very well be the same,” he said. Hurricanes Harvey, Irma and Maria, “plus record California wildfires, two earthquakes in Mexico and other events essentially had no impact on rates.”