The US property and casualty (P&C) industry is well positioned to cope with this year’s tropical storm season, according to Fitch.

While early forecasts predict above-average hurricane activity, (re)insurance markets have the capacity to provide sufficient coverage and withstand potential losses, the ratings agency’s latest report says.

Aggregate policyholders’ surplus grew 6% last year to nearly $US600 billion ($622 billion), despite losses from Superstorm Sandy and Hurricane Isaac.

“Given the current substantial level of industry capitalisation, it would likely take a record individual storm loss or a series of significant losses to have an impact on Fitch’s outlook for the P&C sector,” the report says.

Pricing on US hurricane-exposed property business has generally improved following Sandy, according to Fitch.

But catastrophe reinsurance pricing, particularly in the high-profile Florida market, “continues to be dampened” by an abundance of underwriting capacity and growing competition from alternative products.

Insurers use hurricane deductibles to mitigate exposure to large loss events, the report notes.

However, during Sandy there was “considerable debate” over whether they should be waived to reduce claimants’ financial burden, “highlighting the potential political risk of hurricane deductibles”.

“Uncertainty tied to applicability of hurricane deductibles in the wake of large storms may consequently lead to reduced private market underwriting capacity and higher premium rates in coastal areas.”