Re/insurers reveal the pain of Q3 storms
More reinsurers and insurers have released details of their third quarter catastrophe losses, reflecting the extent to which they were exposed to losses stemming from the recent hurricanes to make landfall in the US.
Bermuda-based Everest Re said it expects to incur pre-tax catastrophe losses, net of reinsurance and reinstatement premiums, of $1.2 billion in the third quarter.
After taxes, the net economic impact is estimated at $900 million, the company said. The calculation includes losses from hurricanes Harvey, Irma and Maria (HIM), as well as from the earthquake events in Mexico.
Losses are on the company’s reinsurance and its insurance segments. Everest’s view of its losses from the events assumes an aggregate industry loss in the range of $100 billion for the third quarter.
Everest Re also noted that it is the sponsor of catastrophe bonds, through the Kilimanjaro Re series, with $2.8 billion of multiyear collateralised capacity for specific perils as well as aggregate protection for losses arising from named territories, including Texas, Florida, and Puerto Rico.
In addition, Everest’s capital market facility, Mt. Logan Re, maintains close to $1 billion of assets under management that further support the company’s catastrophe exposures.
“Our robust balance sheet and strong risk management programme provide assurance to our clients that Everest will deliver when it matters most,” said Everest Re CEO Dom Addesso.
Helping hand
Another Bermuda re/insurer, AXIS Capital Holdings, said it expects the total net financial impact from third quarter 2017 catastrophe losses to be $578 million.
This loss is net of tax and estimated recoveries from reinsurance and retrocessional covers, and includes the impact of estimated reinstatement premiums.
“We have commenced paying claims for our insureds, and our team will continue to work tirelessly with our clients and partners so that we can assist in the rebuilding efforts,” said AXIS Capital CEO Albert Benchimol.
Under the terms of the property catastrophe reinsurance treaty which principally applies to these events, the insurance segment maintains cover in excess of $200 million per event, net of recoveries from applicable property per-risk treaty and facultative reinsurance, according to the statement.
The insurance and reinsurance segments of the company both contributed to the after-tax net losses. Retrocessional recoveries were estimated at $136 million.
Tokio Marine Holdings said it expects pre-tax incurred losses (net of reinsurance) attributable to HIM, and the earthquakes in Mexico, of approximately ¥65 billion ($580 million).
The group maintains strict risk management, according to the statement, and the adjusted net assets for Tokio Marine Holdings for the fiscal year ended March 31, 2017, is around ¥3.8 trillion.
The company noted that it believes the reported nat cat losses will have a minor impact on the financial soundness of Tokio Marine Holdings.
Arch Capital Group said it expects after-tax costs of $285 million to $345 million from natural catastrophes in the third quarter of 2017. The nat cat assessment includes HIM, the Mexican earthquakes, and other more minor global events.
Due to the mix of estimated catastrophic losses by jurisdiction, Arch anticipates the tax rate applicable to these catastrophic losses to be lower than its effective annual tax rate on pre-tax operating income. The company determined a range for total industry insured losses across all 2017 third quarter events of $80 billion to $100 billion.
The company warned that actual losses may increase if the company’s reinsurers fail to meet their obligations to the company or the reinsurance protections purchased by the company are exhausted or are otherwise unavailable.
XL Group said it expects net losses of approximately $1.33 billion relating to HIM, with total catastrophe losses including smaller loss events of approximately $1.48 billion in the third quarter.
These preliminary estimates are pre-tax and net of reinsurance, reinstatement and adjustment premiums and redeemable non-controlling interest. On an after-tax basis, the preliminary estimate of total catastrophe net losses for the quarter is approximately $1.35 billion.
Harvey, Irma and Maria contributed approximately 25 percent, 40 percent and 25 percent, respectively, to the company loss estimates, with 10 percent related to all other events in the quarter, notably the Mexican earthquakes and Typhoon Hato.
The estimated losses are approximately evenly split between XL Group’s insurance and reinsurance segments. The company noted that after the events it continues to have significant catastrophe reinsurance protections remaining for 2017 and 2018, including catastrophe bond protections, some of which extend through 2019.
XL’s CEO Mike McGavick said: “The problem of underinsurance is again laid bare, afflicting especially those who are already less well off. It is appalling, and all of us with expertise to offer must bend our minds to solving these systemic failures.
“Risk awareness has changed due to these events, and this in turn should cause the market to move towards more realistic and sustainable pricing for the risks undertaken.”
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