Industry experts say that the numerous business interruption claims being filed in Puerto Rico due to the hurricane-induced power outage could be the figurative last straw that breaks the camel’s back, overwhelming reinsurers that are already neck-deep in other Hurricane Maria-related expenses.
According to some estimates, claims from Hurricanes Harvey, Irma, and Maria could push 2017’s total global catastrophe losses as high as $190 billion – making this year the costliest on record for the insurance and reinsurance industries.
Experts believe the high costs could be too much for reinsurers and lead to ratings downgrades. Fitch Ratings last week warned that the high levels of losses caused by the three hurricane events could trigger a “capital event,” wherein catastrophe losses exceed earnings and lead to net losses for the year, forcing reinsurers to fall back on their capital reserves and risking ratings downgrades.
“[Hurricane Maria] is a major insured loss that is likely a pretty major negative surprise to the industry,” JLT Re North America head told Reuters.
According to Keefe, Bruyette & Woods, the top reinsurers of Puerto Rico’s insurers are Mapfre SA,
QBE Insurance Group Ltd, Lloyd’s of London, and
AIG.
Mapfre is expecting “recent natural disasters” to diminish its full-year profit by $175 million, it stated last week.
Puerto Rico continues to suffer from widespread power outages after Hurricane Maria knocked out its electrical grid. Some experts believe this blackout would lead to more companies and shops filing for business interruption claims.
“The longer the power stays out, the more you’re going to have business interruption claims,” Fitch Ratings analyst Keith Buckley explained.
Estimates of when the US territory regains power, range from three to six months.
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