Claims arising from Hurricane Irene are likely to be relatively low, according to Moody's Investors Service.
But in a new report, the analyst said that while the hurricane is not expected to be a major capital event for the US P&C industry losses will pressure earnings that have already been weakened by higher-than-usual winter storm and tornado losses in the first two quarters of the year.
Moody’s Vice President Paul Bauer said: ""Although wind speeds and hurricane intensity were less than initially expected, a number of unique characteristics, such as the high levels of inland flooding, extensive power outages, and the very wide dispersion of the storm combine to create a high degree of uncertainty in terms of early loss estimates.
“And because of these unusual factors, we suspect that as insurance claims are filed in the coming weeks, some surprises may be in store."
But while the volume of claims is likely to be high in comparison to a typical hurricane, claim amounts likely will be low, Bauer said.
"Rather than direct severe damage from wind, we expect high levels of damage from such things as fallen trees, as well as minor structural damage."
Higher than usual automobile-related losses due to flooding, and high losses on both homeowners' and commercial insurance policies from power outages, are also expected.
Bauer, who wrote the report, noted that widespread power outages caused numerous pump failures, in turn leading to water damage. A further complicating factor is that losses are likely to be unusually high in communities in mountainous areas that have been affected by heavy rains.
"Given Hurricane Irene's unusual characteristics, we believe modeled loss estimates will continue to vary widely, at least in the short term. However, once companies begin to report their own internal estimates based on more accurate claims data, we expect that the hurricane will not prove to be a major capital or credit event for the P&C industry."
In addition, Moody's does not believe that losses will trigger reinsurance coverages, making this an insurance, rather than a reinsurance, event.
Bauer also noted that that with only small changes in its track and wind speed, Irene could have had much more severe consequences than what appears to have been the case.
"The close call of a moderate catastrophe should help support pricing discipline for P&C insurers," he said.
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