Hurricane losses humble reinsurers, A.M. Best

The global reinsurance industry is still struggling to manage its catastrophe exposure even almost a year after hurricanes Katrina, Rita and Wilma struck, according to a recent report from A.M. Best Co.The 2006 global reinsurance report called “Reinsurers Humbled, But Most Not Broken, By Hurricane Losses,” says the U.S. hurricanes caused reinsurers across the globe to absorb 60% of the record insured property losses. Bermuda- and U.S-based companies have taken the brunt of this at US$11 billion and US$7 billion, respectively, according to the ratings agency. However, the report indicates that total costs “may not be known for some time.” The report notes that “the underlying stability of the current reinsurance market remains tenuous, even though most reinsurers are financially positioned to meet their claim obligations.” Since the 2005 hurricanes, A.M. Best says the financial-strength ratings of 13 U.S. and Bermuda reinsurers have been downgraded or withdrawn after being downgraded, as of July 31, 2006. The cause of these downgrades stems from hurricane losses, according to the report. Four Bermuda-based companies also have been placed in run-off.A.M. Best says reinsurers are bracing for a long period of heightened catastrophe risks. Based on current trends, A.M. Best says it appears the reinsurance industry will become an even more capital-intensive business than it has been traditionally.