Hurricane Otis is expected to cause up to $16 billion in economic losses in Mexico and insurers will call on reinsurance support, Fitch Ratings said.
But even though the most exposed insurers tend to cede a significant portion of their catastrophe losses to the global reinsurance market, the ratings agency said the effect on global reinsurers would be “negligible.”
Fitch Ratings provided useful information on the extent of damage caused by Category 5 Hurricane Otis, which had major impacts on the Acapulco and Guerrero region of Mexico last week.
Fitch said Mexico’s National Insurance Association (AMIS) reported damage to 80% of Acapulco’s hotels, while some 16,000 homes and 20,000 vehicles in the region were damaged by Hurricane Otis. .
Fitch said: “As insurers generally rely more on ceding catastrophe losses to reinsurance partners to limit net retained losses, NWP exposure to property and casualty losses is low. »
But he said: “We expect most global reinsurers to bear a share of the losses given the heavy damage caused to tourist areas likely to benefit from insurance coverage.
“However, losses will be negligible for global reinsurers, which are geographically diversified.
“The Mexican reinsurance market is dominated by foreign reinsurers, with less than 3% of premiums written by local insurers. »
Overall, Fitch Ratings said that Hurricane Otis in Mexico, although it caused significant economic losses in affected areas, “is expected to have a negligible credit impact on earnings of the Mexican construction industry.” insurance and will not affect the capital of individuals (re)insurers.
“The effect of the storm on the Mexican insurance sector is expected to be contained and in line with rating expectations. The sector is well capitalized and regulated, and will withstand higher insured and economic losses from the storm, given the low market penetration and high cession rate which reduces profit and capital pressures on local private insurers . »