When the wind blows

Well, we’re a week into this year’s North Atlantic hurricane season and Central America has taken the first landfall of 2010 from Tropical Storm Agatha.

According to this report in Reinsurance magazine, the modelling company Risk Management Solutions (RMS) said Agatha was associated with torrential rainfall, which triggered flash flooding and landslides across Guatemala, El Salvador, Honduras and southern Mexico as it tracked inland. A State of Emergency was declared in parts of all four countries as initial reports of the death toll vary from 80 to 125.

Tragic though this is for those who have lost their lives of those left behind trying to rebuild theirs it is not the main focus of the reinsurance press and so gets only limited coverage.

Instead the focus will be on what might happen along the East Coast of the US and in the Gulf of Mexico and as The Insurance Insider reports all of the major weather forecasters were united in predicting a higher than average chance of storms making landfall.

National Oceanic and Atmospheric Administration (NOAA) expects an “active to extremely active” while Colorado State University says activity this year was likely to be 195 percent of the long-term average and Tropical Storm Risk adds that there is a “high (85-90%) likelihood that activity will be in the top one-third of years historically”.

As The Insurance Insider points out (re)insurers have already suffered this year with $16bn-plus industry losses in the first quarter and the ongoing oil disaster in the Gulf of Mexico, that could have caused losses of up to $3.5bn already and could become a lot worse both environmentally and financially if the win blows in that direction.

The ability of (re)insurers to withstand further losses was the focus of Reactions article on how the wind season may impact on ratings. It would appear that Moody’s foresees downgrades if capital levels were eroded.

Last year’s predictions made equally depressing reading for (re)insurers, however El Nino ensured that those fears weren’t realised. It would surely be only the most optimistic, or naïve, that relied on the Pacific weather systems repeating the trick this year.

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