Increase in small hurricanes could halt further price declines

An increase in small hurricanes making landfall this season, in addition to the high level of catastrophe losses insurers have already absorbed during the first half of 2008, will likely bring a dose of reality to the competitive property cat markets and halt further price declines in 2009 according to A.M. Best. “A.M. Best expects that reinsurers are again recognizing that the potential for loss cannot be ignored and the competitive confidence of some underwriters will wane,” A.M. Best says in a recent statement. Although the losses from Hurricane Gustav in Louisiana are considerable compared to premiums collected, A.M. Best does not anticipate Gustav alone will change the competitive dynamic of the insurance and reinsurance markets. The ratings agency says it believes the 2008 hurricane season is demonstrating the considerable risk that was originally projected for the season. “While the landfall of a Category 3 or above hurricane will hopefully be avoided, the recent increase in activity with Tropical Storm Hanna, Tropical Storm Ike and Tropical Storm Josephine provides reason to be concerned with the potential of such an occurrence,” A.M. Best notes.