Q3 insured losses could be costliest in history

Insured catastrophe losses in the third quarter of 2017 could exceed $100 billion and become the costliest in history, according to an Oct. 3 Morgan Stanley research note.

In a span of 26 days, Hurricanes Harvey, Irma, Maria and two powerful earthquakes devastated Texas, Florida, the Caribbean, and Mexico. Industry estimates put insured losses to ~$10-25billion for Harvey (ex. ~$10 billion+ NFIP flood losses), ~$30-55billion for Irma, ~$15-85 billion for Maria, and multiple billions for Mexico earthquakes. The total industry losses range from $70-150 billion. Adding ~$20 billion from the first half of 2017 catastrophes, 2017 could surpass 2005 (Katrina) and 2011 (Japan earthquake) as the costliest year from natural catastrophes.

Among Morgan Stanley’s coverage, global reinsurers AXIS, Renaissance, XL Group, and Everest Re could be hit the hardest. While the risk of capital raise for the companies is low, buybacks could be on hold through 2018 as the reinsurers rebuild their excess capital positions.

Morgan Stanley expects a hit to book value for its covered P&C carriers of between 1 and 12 percent from cat events. Record losses point to rising property cat re/insurance pricing, which could lead to improving fundamentals for global reinsurers for the first time in 5 years.

A confluence of factors will lead to a cycle turn, according to the analysts. For one, record losses significantly impact earnings and weaken industry capital cushion. Also, the market is experiencing very low price levels. In addition, alternative capital could face material losses or be "tied up" in protracted claim process.

“We expect double-digit rate increases in property cat reinsurance, with more in the 'retro' market,” the analysts said. Consequently, global reinsurers could see improving fundamentals for the first time in 5 years.

Get the latest re/insurance news sent to your inbox every day -  Sign up to our free email newsletters

US nat cat prices to increase 10% due to above average losses in 2017

Willis Towers Watson bolsters NA broking business with new roles

XL Catlin hires ocean marine insurance experts from CNA and Allianz

AmTrust expects up to $65 million cat losses in Q3

Chubb reshuffles management in global life and general insurance operations

American Financial Group expects $105m nat cat losses

Don't miss our insurtech email newsletter - sign up today