Presented by: Return of the Hurricanes If a large hurricane makes landfall this year, a confluence of forces could make it a “perfect storm.”
When that large hurricane comes through or if it does in the third quarter, it changes the market pretty dramatically.
Sanjay Godhwani, Chartis U.S. and Canada Region
After several years with no significant hurricanes making landfall, it’s easy for an industry flush with capital to become complacent. However, a major hurricane this year could force a dramatic shift in the market. Unlike in 2005 and 2008, insurers cannot rely on casualty lines to boost profits in the event of a big catastrophe loss because they, too, are performing poorly. Insurers also must contend with the new RMS U.S. Hurricane Model (version 11.0), which essentially indicates that carriers need more capital to support their business. Add to that the catastrophe losses in the first half of 2011 and low investment returns. Taken together, these forces will create a quick turn in the market following a hurricane.
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