Hurricane Francine losses manageable for P&C insurers, minimal for reinsurance: RBC

According to equity analysts at RBC Capital Markets, hurricane Francine is expected to be a manageable loss for the property and casualty insurance industry, while little in the way of loss impact is expected for the reinsurance market.

While Francine was the third hurricane landfall of the 2024 season for the United States, the financial costs for insurers and reinsurers remain minimal so far.

The storm made landfall in Louisiana on Wednesday as a Category 2 hurricane with 100 mph sustained winds.

Widespread flooding impacts from storm surge and inches of rainfall appear to have been the most notable impacts, while wind-related damage does not appear overly extensive from media reports.

Hurricane Francine’s landfall was in a region with relatively lower insured exposures, which will help to limit losses from the storm, but the water-related impacts spread widely, including to New Orleans.

“While it is too early for loss assessments, we expect Hurricane Francine to be a highly manageable loss event for the P&C insurance industry,” RBC Capital Markets analysts said.

Adding, “We don’t expect Francine to be a major insured loss event for the P&C insurance industry and our initial expectation would be insured losses somewhere in the very low billions.”

It will add to the 2024 hurricane season toll for some insurers, given hurricane Beryl’s landfall in Texas has been estimated as a roughly $2.5 billion to $4.5 billion market loss and hurricane Debby’s landfall in Florida a $1 billion to $2 billion industry loss event, the analysts noted.

“Collectively, the insured loss total so far between the three hurricanes is manageable in our view although up from 2023’s light hurricane season,” they explained.

The analysts expect the top homeowners multi-peril writers will take a share, as too will larger companies that have a presence in commercial lines and personal auto.

The analysts also said that, “We don’t think that the loss totals will rise much to the level where reinsurers will have noteworthy losses from Francine.”

Given where attachments now sit, excess-of-loss reinsurance arrangements will be expected to largely avoid any impact from hurricane Francine, while quota share reinsurance arrangements will take their typical shares in losses and some aggregate contracts may see further erosion of deductibles.

Those last two categories are where the insurance-linked securities (ILS) market could experience some attritional impacts, either via collateralized quota shares or through the erosion of aggregate deductibles for any exposed aggregate ILS contracts, such as catastrophe bonds. These would both be expected to be very minor with a low single-digit billions catastrophe loss.

RBC Capital Market’s analyst team conclude, “While Francine (and increased hurricane formations) may draw some attention from the media, we don’t think it alone should have much of a direct influence on homeowners’ insurance rates (which have already been rising notably in most states over the past few years).”