Sandy could shroud 1/1 renewals in uncertainty

The complexity of loss adjustment issues associated with Hurricane Sandy means that the re/insurance industry is unlikely to have a clear picture of the potential reinsurance losses going into the January renewals. This is the view taken by reinsurance broker Guy Carpenter in its latest update on Hurricane Sandy (Sandy).

However while losses are likely to be complex and will take time to measure, Sandy’s effect on the reinsurance sector’s capital position appears to be manageable at this point.

Guy Carpenter said that by the end of the third quarter, and prior to the Sandy loss, dedicated reinsurance sector capital was approaching $200 billion, implying excess capital of around $25 billion, or 15 percent. This is ample capital to absorb losses emanating from Sandy, even if some currently higher loss estimates prove true.

Guy Carpenter also said that Sandy is not expected to change the aggregate supply of reinsurance capacity or their clients' aggregate demand for catastrophe coverage in 2013 and that reinsurance capacity will exceed their clients' demand in 2013.

As such while loss impacted risk and catastrophe programs may see price adjustment based on company specific factors, Guy Carpenter do not believe that the reinsured industry loss from Sandy will rise to a level that will change the direction of 2013 market pricing.