Hurricanes Harvey and Irma have decimated parts of the US over the past week and insurance stocks in Australia have fallen as a result. Last week, shares in QBE fell 2%, Suncorp dipped 2.1% and IAG fell 3.9% as Irma made its way to the coastline and the aftermath of Harvey became clearer, The Australian reported.
In a conference call, Craig Bennett, insurance ratings director at S&P, said that QBE faced the most risk.
“The potential for claims to be large is there,” Bennett said. “The potential for Australian exposure would probably be largely through QBE and they do have moderate levels of well-structured reinsurance in place to manage that risk. It wouldn’t create any pressure on the rating at this point.”
Australian insurers could also be impacted by rising reinsurance prices as a result of the damage from the pair of storms, but Bennett noted that the amount of capital in the reinsurance market should be able to handle the “material” costs.
“We feel there is good capacity in the reinsurance market globally to handle this,” Bennett continued. “It is still early days, we don’t know the size of the claims so we need to wait and see to what extent that results in material damage.”
Closer to home, Bennett noted that the ratings agency is seeing a hardening of the Australian insurance market. He highlighted commercial property, CTP and professional indemnity as areas of the market seeing rates pushed through as retention rates remain steady for insurers.
“We are looking at hardening - in particular commercial lines,” Bennett said. “Some of that has been recognised in the half year to June, but we feel there is still quite a bit that has been put through that hasn’t been recognised, particularly in commercial property, CTP and commercial motor.”
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Standard & Poor’s has downplayed the impact hurricanes in the United States could have on Australian insurers.