US hurricane season may halt rate decline

The impact of Hurricane Charley in Florida is likely to slow the downturn in the underwriting cycle rather than lead to a hardening of rates, according to analysts.

Estimates for the 160-mile wake of devastation - from Port Charlotte to Daytona Beach - are now between $5bn and $10bn, (£2.8bn and £5.6bn), despite initial reports claiming the event was on a par with Hurricane Andrew, which struck the area in 1992 causing $19bn (£11bn) of damage.

However, the Benfield Hazard Research Centre's Tropical Storm Risk Division has estimated an 86% probability of an above-normal Atlantic hurricane season. In this event, rate movement could grind to a complete halt, according to analyst Barry Cornes of Cheuvreux. "While the impact of Charley is likely to slow rate decline, the occurrence of another hurricane of comparable magnitude could have the effect of stopping a slide and could, ironically, have a positive effect on the insurance sector. Estimates for existing damage are now settling nearer $5bn than $10bn."

Jim Mero, assistant vice president and general manager of GAB Robins North America, said estimates included business interruption - not just material damage - adding: "We are hearing between $5bn and $15bn in estimated damages from the Federal Emergency Management Agency and the Department of Insurance."

Affected insurers such as Axa Re, Royal & SunAlliance, Lloyd's - including Wellington and Goshawk - Hannover Re and St Paul Travellers, have all indicated that their exposures are within normal budgeted losses.