Matthew unlikely to affect property market after all, industry leaders say

Losses have been much more moderate than originally anticipated, falling far short of the mark it would take to cause a steep increase in rates

Insurance News

By

Hurricane Matthew, once billed as a “market-changing event,” is now unlikely to affect appetite or rate-making among property insurers in the Southeastern United States, experts have said.

Hurricane Matthew was downgraded to a post-tropical cyclone Sunday morning after plowing the east coasts of Florida, Georgia and the Carolinas. The storm, which hit Florida on Thursday, has caused at least 19 deaths and the evacuation of millions, along with the closure of thousands of businesses along the waterline.

President Obama signed a disaster declaration for Florida over the weekend, freeing up additional federal funding and resources to help with cleanup and to ease the burden of the estimated $4 billion and $6 billion in Matthew-related damages.

That projection, made Saturday by data analysis firm CoreLogic, does not account for insured losses related to additional flooding, business interruption or contents. Regardless, it does fall significantly short of the $10 billion to $50 billion insured loss estimate made Friday by Risk Management Solutions (RMS).

The downgrade in expected losses means the potential for any significant impact on the insurance market, including premium increases, is unlikely, said Gary Marchitello, head of property broking with Willis Towers Watson.

“It is looking less likely [Matthew] will reach the $30 billion initial loss estimates offered by the catastrophe modelling firms,” said Marchitello, who earlier said the storm could be a “market changing event” for commercial insurance. “The $30 billion mark is really the tipping point, and anything less than this will not have a material impact on the market.”

Meyer Shields, managing director and analyst for investment firm Keefe Bruyette & Woods, agreed. In a note to investors Friday, Shields said that while Matthew would “produce meaningful losses” for property/casualty insurers,” the firm still does not expect the storm to drive meaningful rate increases thanks to the abundance of capital in the industry – even for relatively young, Florida-focused insurance companies.

In fact, in an interview with Insurance Business America, Shields said a market-changing event may not even be possible for the region.

“I would even say the $30 billion mark is quite low,” Shields said. “There is definitely a number [at which the market would be impacted], but that’s not it. Historically, market-changing events have to be both big and shocking, and Matthew isn’t shocking.”

Shields pointed to Hurricane Andrew as a market-changing event, but expressed skepticism over whether future storms could move the needle in the same way, as the Southeast is “incredibly well-modeled” and thus makes the “shocking” factor difficult to achieve.

Insurers also benefitted somewhat from strong building codes in Florida and throughout the region, said Chris Hackett, senior director of personal lines with the Property Casualty Insurers Association of America (PCI).

“I think that conscientiousness will show with reduced property damage and losses,” Hackett told Insurance Business America, adding that as rates are developed over the long-term, it is unlikely any one event – like Matthew – would disrupt premium pricing.

According to Keefe Bruyette & Woods, the insurance companies with the most exposure to Matthew are:
  1. State Farm – 13.7% market share
  2. Allstate – 6.8%
  3. Nationwide – 6.7%
  4. USAA Insurance – 6.5%
  5. Travelers – 6.5%
 
In Florida, the most exposed insurers include:
  1. Citizens Property Insurance – 8% market share
  2. Universal Insurance – 5.1%
  3. Tower Hill Group – 4.6%
  4. State Farm – 4.2%
  5. American International Group – 4%
And in North and South Carolina, they are:
  1. State Farm – 12.7%
  2. Nationwide – 8.1%
  3. NC Farm Bureau Mutual Insurance – 5.7%
  4. Allstate – 5.5%
  5. Liberty Mutual 5.5%

Related Stories:
Matthew could be a "market changing event" for the insurance industry
Worst of Hurricane Matthew could be ‘yet to come,’ says FL governor
 

Keep up with the latest news and events

Join our mailing list, it’s free!