Outside of Florida, large (re)insurers are positioned to absorb the shocks of potential catastrophic hurricane damage, Fitch Ratings has determined in their US Hurricane Season 2022 report.

The publication, which is a desk reference for insurance investors, said a third consecutive highly active hurricane season was predicted for the North Atlantic Basin.

Fitch said: “Natural catastrophe losses, particularly severe hurricane-related events, represent a major source of loss volatility to property/casualty insurers.”

Increased storm activity is one thing but how many, if any, will reach landfall, is the necessary factor in determining the future for property owners and insurers.

The forecast from Colorado State University includes a 71 per cent probability of a strike along the US coastline by a major hurricane this year.

Fitch noted that despite the US experiencing only two hurricanes making landfall in 2021, it was one of the costliest years on record.

Hurricane Ida ranked as the second most expensive storm in history, generating $36 billion of insured losses, according to the Insurance Information Institute.

The agency said there were additional challenges to property/casualty insurers in the event of a hurricane strike because of the sharp increase in inflation and potential for stagflation.

Fitch said: “Capital strength provides insurers with an ability to withstand losses from large adverse events, including catastrophes. Industry policyholders’ surplus increased by 40 per cent over the last three years and now exceeds $1 trillion.

“Florida homeowners’ insurance specialists reported continued performance deterioration and a decline in capitalisation levels despite no hurricanes hitting the state since 2018.”

Escalating loss costs for insurers and the reduced availability and rising cost of property insurance for policyholders are significant issues for the state.

Citizens Property Insurance Corporation, the state-sponsored insurer of last resort, is directly affected by the level of insurance availability in the private market, with policies in force rising rapidly over the past 18 months as multiple Florida-based insurers were liquidated or failed to renew policyholders.

“Many insurers in the state have experienced severe pressure regarding underwriting performance and capitalisation levels, leading to the liquidation of a number of carriers. As a result, policyholders have found it increasingly difficult to find private market homeowners’ insurance coverage.

“The June/July midyear 2022 reinsurance renewals will be challenging for Florida primary underwriters with reduced reinsurance supply, reflecting recent adverse loss experience.

“Rate increases are expected to easily reach the double-digit levels, with many reinsurers limiting capacity in Florida to curtail volatility.

“Fitch currently has a neutral sector outlook on the US p/c insurance industry and the global reinsurance sector.

“Capital strength of (re)insurers should allow them to absorb near-term large insured losses from an individual hurricane or other catastrophic event, but a confluence of large events in a short period may lead to capital reductions and ratings pressures.”