Insured losses from Mexico’s Hurricane Erick, which made landfall last week, are expected to be contained, with parametric insurance contracts unlikely to be triggered, according to a recent report by AM Best.
Hurricane Erick made landfall last Thursday morning as a dangerous Category 3 storm, striking Mexico’s southern Pacific coast. It had reached Category 4 status before weakening to Category 3 at landfall.
AM Best expects the primary impact for most insurers with exposure in the Oaxaca and Guerrero states will be mainly from business interruption losses due to prolonged power outages, flooding, and food shortages. Lesser material losses are anticipated for commercial and residential infrastructure, as well as high-value hotels and resorts.
Although Hurricane Erick is the strongest hurricane ever recorded along Mexico’s Pacific coast this early in the season, AM Best estimates that insured losses will fall well below the $1.97 billion recorded from Hurricane Otis in 2023.
Salvador Smith associate director, AM Best, said, “Mexico’s insurance industry is strongly capitalised and has sound levels of catastrophic provisions aimed at mitigating the effect.
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“We’ll continue to monitor the financial impact of Hurricane Erick on rated companies, as well as credit risk with counterparts and liquidity among rated insurers.”
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