After a devastating event Hurricane Otis hits the Guerrero coast a week ago, Catastrophic losses are estimated at $16 billion.both economic and insurance in nature, Fitch Ratings indicates.
The ratings agency stressed that Otis is considered the most severe cyclone to hit Mexico’s Pacific coast, reaching the highest category 5 in less than 12 hours and killing 46 people so far.
‘Little’ credit impact for insurers
However, despite the scale of the losses, Fitch expected that credit impact “negligible” in the profitability of the Mexican insurance industry and that this does not affect the capital of reinsurers individually.
“The agency estimates that the hurricane’s impact on the Mexican insurance industry is under control and within Fitch’s current ratings expectations.
“The sector is well capitalized and regulated.
He added that the insurance sector has low market penetration and high cession rate, which reduces profits and capital pressure for local private insurers, “therefore will withstand insured losses due to a hurricane“
Damage: 80% of hotels, 16 thousand houses and 20 thousand cars.
According to the Mexican Association of Insurance Organizations (AMIS), damage reached 80% of the city’s hotels, 16 thousand houses and 20 thousand vehicles.
Fitch explained that damage insurance in Mexico is generally limited to hotels and resorts.
As of the second quarter of 2023, 9% of the Mexican insurance industry’s net premiums written (PNE) amounted to $40 billion in damage insurance, excluding 19% of automobile policies.
Meanwhile, catastrophic riskwhat does the bonus include? earthquakes and hydrometeorological risks, According to the National Insurance and Surety Commission, it accounted for only 1.8% of the total number of PNEs nationally, with less than 0.1% subscribing in Guerrero.
In addition, he clarified that insurers in Mexico transfer part of the catastrophe risks to reinsurers to limit unallocated net losses, which gives them “low risk”; although, according to him, “companies are more likely to insure hydrometeorological risk.”
Insurers most exposed to damage from Otis
Among the insurers most exposed to damage caused by Otis, primarily in Acapulco, Fitch listed Qualitas, Inbursa and BBVA.
He also noted that the insurance sector is dominated by international reinsurers, which are geographically diverse, and less than 3% of premiums written are from domestic insurers.
The Mexican government estimated this Wednesday the cost of repairs and social support in Guerrero after Hurricane Otis, seven days after its impact, at 61.313 million pesos (more than $3.400 million). (EFE)
Source: Aristegui Noticias
Roy Brown is a renowned economist and author at The Nation View. He has a deep understanding of the global economy and its intricacies. He writes about a wide range of economic topics, including monetary policy, fiscal policy, international trade, and labor markets.
