A $100 billion plus catastrophic event, called a mega-cat in a new study, could cause a significant number of insurer failures, although the study does not explore the impact of a mega-cat on insurance agents and brokers. A.M. Best has completed a new study (see here, and here) looking at whether a mega-cat is a real possibility and the impact it would have on the insurance industry.
Best used leading cat modeling services to estimate the impact of significant credible events, primarily hurricanes hitting the Florida or New York coast where there are large concentrations of people and high-value real estate. In these most significant event scenarios insured property losses ranged from $95 billion to $146 billion. Some of the key conclusions:
- While the insurance industry in aggregate could weather such a financial storm, individual insurer rating downgrades and financial impairments likely would soar
- 20 to 50 insurers would be vulnerable to failure
- The probability of a major U.S. hurricane landfall is estimated at 55% above average [for 2006]
- Customers could expect delayed claims payments and insurance availability issues in the aftermath
In the discussions of the hurricane exposure the focus on has been on customers and insurers and little attention has been paid to insurance agents and brokers. The hurricanes of last year, particularly Katrina, had a significant impact on many insurance agents and brokers. Very little information for agents is available (but see here, here and here for limited information; see prior posts here and here for related information).
Specialty Insurance Expertise: Tennant Risk Services