S&P says quake will hit insurers’ earnings, ratings stable

Article – BusinessDesk

Feb. 24 (BusinessDesk) – Standard & Poor’s Rating Services says general insurers will acutely feel the effects of Christchurch’s latest 6.3 magnitude earthquake, although no ratings downgrades are expected at this time.

S&P says quake will hit insurers’ earnings, ratings stable for now

By Jason Krupp

Feb. 24 (BusinessDesk) – Standard & Poor’s Rating Services says general insurers will acutely feel the effects of Christchurch’s latest 6.3 magnitude earthquake, although no ratings downgrades are expected at this time.

“While still very early to accurately assess, we would expect the insurance loss to far exceed that of the September 2010 Christchurch earthquake, which currently stands at around $5 billion, and add to the general insurers’ recent major flood losses in Australia,” the credit ratings agency said in a statement.

S&P said a number of insurers had already release guidance around the exposure to the event, which would contributed to the ongoing lackluster earnings for the sector.

These included Suncorp Group, which had tapped $60 million in reinsurance to cover its exposure to the quake, and Insurance Australia Group had called in A$40 million in cover. Tower Ltd., the general insurer controlled by Guinness Peat Group, advised the market on Tuesday that reinsurance cover would limit its exposure to the disaster to $5 million.

S&P said overall ratings were being supported by general insurers’ capital strength, reserve adequacy and reinsurance protection, although the frequency and scale of the catastrophes had eroded some financial flexibility.

The industry was also being propped up by the Earthquake Commission, which will meet the first $1.5 billion of residential exposure with substantial reinsurance protection beyond that. Additionally major global reinsurance players will bear the majority of insured exposure to the event.

The ratings agency said it would consider the rising cost of reinsurance when assessing the state of general insurers in New Zealand and Australia.

“Reinsurance capacity has been ample in recent years but we are now moving from a buyers’ to a sellers’ market, in view of the catastrophic events,” S&P said. “As a result the cost and availability of reinsurance cover may not be as attractive as before.”

(BusinessDesk)

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