Fitch: $2B-$10B in Insured Losses for Hurricane Frances

September 9, 2004

Fitch Ratings expects Hurricane Frances likely will represent a material loss to the insurance industry. Preliminary estimates of insured losses vary widely in a range of $2 billion to $10 billion.

A back-to-back landfall of major hurricanes is a relatively rare event and, thus, Hurricanes Charley and Frances will affect the industry differently than a single larger event of its kind.

Fitch Ratings issued a special report “Hurricane Frances: Florida Takes a Second Major Hit,” available on the Fitch Ratings Web site.

Frances is not expected to trigger a loss to any of the catastrophe bonds in the Fitch rating universe based on current loss estimates.

The insurers most likely to be affected by the storm are those writing primary property insurance (homeowners or commercial multi-peril) in the State of Florida or those selling property catastrophe reinsurance.

Many of the insurers with significant market share in the property lines in Florida are geographically diversified in risk and have high insurer financial strength ratings. However, there are insurers with a geographical concentration of risk in Florida that could be materially affected.

Public-sponsored entities will bear a sizable portion of the insured losses from the two events, though the insurance industry may be required to provide liquidity for one or both of these entities, but the ultimate loss costs will be borne by policyholders.

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