Market Overview

Best's Briefing: Hurricane Florence Imperils Single-State Property Insurers in the Carolinas


A.M. Best's analysis shows that the top companies exposed to
property catastrophe risks in North Carolina and South Carolina that are
likely to be affected by Hurricane Florence possess a strong level of
risk-adjusted capitalization. However, according to a new briefing,
single-state writers in these sates could see considerable gross losses
relative to surplus depending on the severity and location of the storm.

The Best's Briefing, "First Look: Hurricane Florence," notes that
the market share of the large national writers such as State Farm,
Nationwide and Allstate, is considerable in the states in Hurricane
Florence's path, but the size of their portfolios in relation to
policyholders' surplus is relatively small. The briefing includes Top 10
lists of companies in North Carolina, South Carolina and Virginia whose
direct written premiums in the state represent the highest percentage of
the companies' total direct written premiums.

A compounding factor is the increased population and development in the
area since the Hurricane Hugo in 1989, the last major storm to strike
the Carolinas. Given the size and intensity of Hurricane Florence's
winds and the expected, resulting storm surge, losses have the potential
to be significant. Personal lines and small commercial lines insurers
are likely to experience the majority of losses; however, should the
storm maintain strength inland, it could reach the technology centers of
Raleigh, Durham and Chapel Hill, where commercial exposure is

A.M. Best does not expect the direct losses to threaten the financial
health of most insurers, given the robust nature of the current
reinsurance programs most companies have in place. The considerable
level of protection is owed to prior years of favorable reinsurance
market conditions, which supplied primary carriers with favorable terms
and ample top-limit protection. Additionally, improvements over the last
decade in overall risk management capabilities, including exposure
analysis, data availability surrounding risk characteristics and greater
granularity in pricing likely will play a role in mitigating losses
associated with this event.

Most reinsurers will experience losses from Hurricane Florence due to
the highly syndicated nature of property catastrophe business, and the
potential exists for losses to impact alternative capacity on a
reinsurance and retrocessional basis as its participation in the sector
has increased year over year. However, it is A.M. Best's belief that
unless losses are materially outside of expectations or followed up by
subsequent large catastrophic losses, it is unlikely to see any
meaningful market hardening outside of loss-affected areas.

A.M. Best will closely monitor the situation and evaluate Hurricane
Florence's impact in the context of its loss expectations. Although
company loss estimates will take time to determine, all A.M. Best-rated
entities are expected to provide preliminary estimates and/or ranges of
their potential losses within a reasonable timeframe. These loss
estimates should include any potential effects and take into account the
involvement of any government-specific wind and beach residual market
mechanisms when applicable.

To access the full copy of this briefing, please visit

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