Insurers face liquidity crisis in face of Hurricane Ike.
Catastrophes like Hurricane Ike pose a bigger threat to insurers than previous storms due to a shortage of capital from the credit crunch, analysts have warned.
As reported in the Financial Times, insurers and reinsurers are facing the worst losses from Atlantic hurricanes in three years and this, coupled with the economic downturn, could result in less capital flowing into the industry.
The FT said that in 2005, the $80bn of insured losses caused by the hurricane season was smoothed over by an injection of capital that allowed the reinsurance industry to replenish its balance sheets or fund new start-ups.
But Fitch Ratings has said raising debt could make it much more difficult for insurers to recapitalise.
Hurricane Ike has already killed at least 80 people in the Caribbean and caused major damage to homes in Cuba.
Early this morning Ike was a Category 2 hurricane but it is believed it could reach Category 4 and become a major hurricane later today or Friday. It is heading towards Texas, where President George W. Bush has declared a state of emergency. Oil companies are shutting down offshore platforms.
Meanwhile in the Pacific, Tropical Depression Lowell was advancing towards Mexico's Baja California peninsula.
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