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FOR IMMEDIATE RELEASE
OLDWICK - OCTOBER 17, 2014 11:39 AM (EDT)
Hurricane Gonzalo is expected to inflict a glancing blow on Bermuda at some point this evening of Oct. 17, 2014, as a category 3 hurricane with 130 mph winds expected and higher gusts. The eye of the storm is expected to pass slightly west of the island. Bermuda is expected to experience high winds, heavy rains, widespread power outages and significant coastal flooding as a result of storm surge.
For the domestic primary insurers, most claims from Gonzalo are likely to be wind and downed tree damage to roofs, car damage, as well as some business interruption losses from prolonged power outages or travel disruptions. However, since primary domestic insurers are heavily reinsured with manageable retentions, it is anticipated that the brunt to the storm's financial impact will fall to the reinsurance market.
Bermuda is still recovering from Tropical Storm Fay that hit the island Oct. 12, 2014, with force winds of 70 mph that left thousands without power and stores without much needed storm supplies. The last time Bermuda was impacted by back-to-back storms was 1981; however, the level of force winds of those storms was below the wind speeds expected with Gonzalo. Hurricane Fabian in 2003 was the last destructive hurricane to pass through the island as a category 4 with sustained winds of 145 mph.
In Bermuda, residential dwellings and commercial buildings are well built with either limestone or concrete blocks, and roofs are mostly made of limestone tiles cemented together. Building codes on the island are very strict allowing for safer structures that can withstand sustained winds of over 100 mph. Gonzalo's expected wind forces of 130 mph will put the island's building codes and structures to the test.
A.M. Best anticipates that domestic insurers will be insulated from any major financial impact resulting from Gonzalo, given their conservative reinsurance structures. Reinsurance placements are generally with very highly rated counterparties and recoverability should not be an issue. For the reinsurers themselves, this event does not represent a material financial impact and should be easily absorbed. A.M. Best will continue to monitor the situation as it develops and will evaluate any ratings impact on an individual company basis, paying close attention to losses and the impact on company surplus.
The methodology used in determining ratings is Best's Credit Rating Methodology, which provides a comprehensive explanation of A.M. Best's rating process and contains the different rating criteria employed in the rating process. Best's Credit Rating Methodology can be found at www.ambest.com/ratings/methodology .
A.M. Best Company is the world's oldest and most authoritative insurance rating and information source.