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3/14/2011 - Advisen FPN Alert: Fitch Does Not Expect Major Downgrades for Insurers, Reinsurers

LONDON (Dow Jones)--Fitch Ratings said Monday that it does not expect any major ratings downgrades for insurance and reinsurance companies following the massive earthquake in Japan.

These industries should be able to absorb losses without widespread solvency problems or undue financial strain, although primary insurance companies could be downgraded one or more notches if loss estimates escalate, Fitch said.

"Given the current uncertainty regarding estimated insured losses arising from the earthquake, it is difficult to predict the financial impact that the event will have on primary Japanese insurers," the Fitch report said.

At the moment, all Japanese insurers have significant catastrophe reserves that both the Japanese regulator and Fitch include in their capital calculations.

However, "it is possible that catastrophe reserves will be significantly depleted and consequently capital adequacy reduced," Fitch said.

As for the ratings of reinsurance companies, implications are likely to be limited. While some of these companies will be more susceptible than others, " the reinsurance sector is currently well-capitalized following several profitable years and is capable of absorbing a loss of this magnitude," Fitch said.

The agency expects insured losses will end up ranking among the largest in history, although they will be significantly lower than economic losses.

After the Kobe earthquake of 1995, insured losses totaled $3.5 billion, although economic losses were close to $100 billion, Fitch noted. -By Art Patnaude, Dow Jones Newswires, +44 (0) 207 842 9259