* Could be second-most expensive U.S. hurricane for insurers
* Hurricane currently offshore Florida
* Lloyd's of London insurers face "material risks" - analyst
By Carolyn Cohn and Noor Zainab Hussain
LONDON, Oct 7 A hurricane threatening the first
direct hit on the United States in more than a decade could
cause insurance losses of $25-30 billion and be the second
costliest U.S. hurricane on record for insurers, according to
initial industry estimates.
Hurricane Matthew is just off the east coast of Florida near
Cape Canaveral, the National Hurricane Center said in an
advisory on Friday, after killing at least 339 people in Haiti
on its move north through the Caribbean.
Data modelling firm RMS has told clients its initial
estimates were a 42 percent chance of a $20 billion insurance
loss and a 26 percent chance of a $30 billion loss from the
hurricane, a source familiar with the research said.
Ben Brookes, vice president capital markets at RMS told
Reuters its guidance to clients was based on a forecast from
earlier in the week.
"We have continued to update our guidance as the situation
changes," Brookes said, without giving further details.
An estimate from Kinetic Analysis of insured losses of $25
billion would make Matthew "the second most costly hurricane in
U.S. history behind Katrina", JPMorgan analysts said in a note
late Thursday, referring to the hurricane which hit New Orleans
and the surrounding coast in 2005.
Kinetic could not immediately be reached for comment.
Market participants expect these estimates to rise.
"People are looking at this literally every minute and
working overnight on it," one trader said.
The average impact to U.S. property and casualty insurers'
book value from $10-30 billion of insured losses from the
hurricane would equate to around a quarter's worth of earnings,
the JPMorgan analysts added.
A $20 billion insured loss would match the insured losses
caused by Hurricane Sandy in the northeast of the United States
in 2012, which did not make landfall. A loss of this size would
lead to "material risks" for Lloyd's of London insurers, analyst
Ben Cohen at Canaccord Genuity said in a note on Friday.
Cohen calculated a loss equivalent to Sandy would hit
Beazley's earnings by $104 million, Hiscox's by
117 million pounds ($145 million) and Lancashire's by
Beazley estimates an $80 billion storm would cause a $200
million loss, a spokesman said, without specifying losses from a
A Hiscox spokeswoman said it was too early to judge the
impact of the hurricane.
A Lancashire spokesman also said it was early days, but the
firm was feeling "relatively relaxed" about its losses because
it was very lightly exposed to risk in Florida compared with
other states in which it offers reinsurance for wind damage.
The hurricane represented a "real test" of reinsurers'
exposure, S&P Global said in a report, but it did not see a
ratings impact, due to reinsurers' strong capital buffers.
($1 = 0.8093 pounds)
(Additional reporting by Jonathan Gould; Editing by Simon
Jessop and Mark Potter)