AM Best said it expects insured losses from Hurricane Fiona in Puerto Rico will be impacted by business interruptions caused by widespread power outages, but the losses should be manageable for the industry.
“It may take time for loss adjusters in Puerto Rico to assess and estimate the damage,” said David Blades, associate director, Industry Research and Analytics. “However, since Hurricane Maria in 2017, insurance companies on the island have taken significant steps to better manage their risk profiles by tightening underwriting guidelines, sharpening risk management techniques, improving prices and getting significant rate hikes.”
Fiona was more of a water event than Maria, who hit the island five years ago with winds of about 250 mph and caused about $10 billion in insured losses in Puerto Rico. Therefore, Blades added, losses from Fiona (a Category 1) storm are likely related to flooding — a hazard not covered by standard homeowners policies. Flood losses are covered by the National Flood Insurance Program.”
Hurricane Maria has exposed vulnerabilities in Puerto Rico’s electrical grid, and while ongoing efforts have been made to improve it, Fiona “clearsly indicates that more needs to be done,” AM Best said in a comment.
The top 10 insurers in Puerto Rico account for more than 90% of the market share for auto, fire and related, homeowners and commercial multiperil lines, the rating agency noted. Of these, Chubb INA Group and AIG are well diversified, but six companies on the list are insurers with 100% exposure to the island, representing 43% of the market share.
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