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Fitch estimates losses of US$16 billion after Hurricane Otis in Mexico

Fitch estimates losses of US$16 billion after Hurricane Otis in Mexico

The catastrophic losses caused by the Hurricane Otiswhich hit the coast of the southern state Mexican of Guerrero a week ago, are estimated at 16,000 million dollars, both economic and insured, the rating agency said this Wednesday in an analysis Fitch Ratings.

The agency noted that Otis It is considered the strongest cyclone that has hit the Pacific coast of Mexico, after reaching the highest category 5 in less than 12 hours, leaving 46 dead so far.

However, despite the magnitude of the losses, Fitch He expected that the credit impact would be “insignificant” on the profitability of the Mexican insurance industry and that it would not affect the capital of individual reinsurers.

“The agency estimates that the effect of the storm on the Mexican insurance industry is controlled and is within the expectations of the current ratings granted by Fitch. The sector is well capitalized and regulated,” she indicated.

In addition, he noted that the insurance sector has low market penetration and a high cession rate that reduces profits and capital pressures for local private insurers, “therefore, it will withstand insured losses due to the storm.”

According to data from the Mexican Association of Insurance Institutions (AMIS), the damage reached 80% of the city’s hotels, 16,000 homes and 20,000 vehicles.

Fitch He explained that damage insurance coverage in Mexico tends to be limited to hotels and resorts.

As of the second quarter of 2023, 9% of the net premiums issued (PNE) of the Mexican insurance industry They amounted to 40,000 million dollars in damage insurance, excluding 19% of automobile policies.

Meanwhile, catastrophic risk, which includes premiums for earthquakes and hydrometeorological risks, represented only 1.8% of the total PNE at the national level, with less than 0.1% subscribed in Guerrero, according to the National Insurance and Bonding Commission .

Furthermore, he specified that the insurers in Mexico they cede a proportion of catastrophic risks to reinsurers to limit retained net losses, which gives them “low exposure”; although, he said, “companies are more likely to insure hydrometeorological risk.”

Among the insurance entities most exposed to the damage caused Otismainly in Acapulco, Fitch listed Qualitas, Inbursa and BBVA.

He also mentioned that the insurance sector is dominated by international reinsurers, which are geographically diverse, and less than 3% of premiums written are from local insurers.

The Mexican Government estimated this Wednesday at 61,313 million pesos (more than 3,400 million dollars) the cost for repairs and social support in the southern state of Guerrero after the impact of the hurricane Otisafter seven days of its impact.

(With information from EFE)

Source: Gestion

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