Best’s News & Research Service - December 08, 2017 08:12 AM (EST)
Best’s Special Report: Puerto Rico Domestic Insurers Withstand Maria But Significant Headwinds Lie Ahead
- December 08, 2017 08:12 AM (EST)
Oldwick //BestWire// - Despite the large insured loss estimates post-Hurricane Maria in Puerto Rico, A.M. Best believes the insured losses will be manageable and will not breach the vast majority of domestic insurance companies’ catastrophe reinsurance limits; however, the on-going infrastructure and macro-economic issues present considerable challenges.
A new Best’s Special Report, titled, “Puerto Rico Domestic Insurers Withstand Maria but Significant Headwinds Lie Ahead,” states that based on A.M. Best’s discussions with domestic Puerto Rico insurers, company-specific loss estimates may be on the lower side of the most recent modeled estimates, which have topped out at $48 billion, as a large percentage of homeowner’s losses were either uninsured or damaged by flood, which is not covered by the standard homeowner’s policy. A large portion of the island is still without power, and therefore, business interruption losses remain unknown at this point, although many of the domestic carriers that underwrite commercial policies and offer power outage endorsements have stated that a good percentage of insureds do not pick up this endorsement.
Puerto Rico’s domestic companies face a number of challenges ahead. Some of these challenges existed prior to Maria and some will be new as a result of the hurricane. Domestic property/casualty insurers on the Island have thus far successfully navigated through this unprecedented event. However, long-term challenges such as increased reinsurance pricing, an evolving view of risk due to potential catastrophe model changes, on-going macro-economic and fiscal trends and continued population/infrastructure pressures must be effectively managed.
The companies that are able to withstand these pressures are those with solid financial positions, appropriate risk management and clearly defensible competitive advantages. A.M. Best will continue to closely monitor events in Puerto Rico and their potential impact on the rated entities.
To access a copy of this special report, please visit http://www3.ambest.com/bestweek/purchase.asp?record_code=268488 .
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