Best’s Commentary: Initial Loss Estimates for Mexican Insurers from Hurricane Erick Expected to Be Well Below 2023 Hurricane Otis

June 27, 2025 at 09:15 AM EDT

Insured losses from last week’s Category 4 hurricane that made landfall along Mexico’s Pacific coast are expected to be contained with parametric insurance contracts unlikely to be triggered, according to a new report from AM Best. However, the current reinsurance market cycle could be further hardened because of Hurricane Erick and ongoing rapid development of tropical storms into severe hurricanes triggered by rising ocean temperatures.

AM Best expects that for most insurers with exposure to the Oaxaca and Guerrero states struck by Hurricane Erick, the primary impacts will be mainly for business interruption losses from prolonged power outages, flooding and food shortages. Lesser material losses are expected for commercial and residential infrastructure, as well as high-value hotels and resorts. The hurricane had reached Category 4 status before tapering off to a Category 3 storm at landfall.

In AM Best’s view, estimated insurance industry losses for Hurricane Erick will fall well below the USD 1.97 billion in insured losses from Hurricane Otis in 2023. However, storm damage from Hurricane Erick continues to be assessed as it was the strongest hurricane ever recorded along Mexico’s Pacific coast this early in hurricane season.

“Mexico’s insurance industry is strongly capitalized and has sound levels of catastrophic provisions aimed at mitigating the effect,” said Salvador Smith associate director, AM Best. “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.”

To access the full copy of the Best’s Commentary, “Hurricane Erick Makes Landfall in Mexico but Insured Loss Estimates Expected Well Below 2023 Otis,” please visit http://www3.ambest.com/bestweek/purchase.asp?record_code=355027.

AM Best is a global credit rating agency, news publisher and data analytics provider specializing in the insurance industry. Headquartered in the United States, the company does business in over 100 countries with regional offices in London, Amsterdam, Dubai, Hong Kong, Singapore and Mexico City. For more information, visit www.ambest.com.