JP Morgan analysts say European reinsurers’ catastrophe budgets are unlikely to be fully used in the fourth-quarter of 2016, contradicting predictions from other analysts who believe big firms will use up or exceed their major catastrophe loss budgets for the period.
JP Morgan said budgets would likely be unaffected because many of the natural catastrophes in Q4, including hurricane Matthew and New Zealand earthquakes, were medium sized events, meaning that an above normal volume of losses has been retained by primary insurers.
But Deutsche Bank analysts quoted these same catastrophes, together with the Tennessee wildfires, as likely to blow out major firms’ catastrophe budgets in Q4.
Due to strong overall performance for reinsurers in the FY16, JP Morgan’s pricing predictions remain consistent with Deutsche Bank’s, and analysts from both firms agree on forecasts that reinsurance pricing will continue to slowly decline throughout 2017.
The equity analysts quoted Munich Re figures of estimated insured losses being at $50 billion in 2016 compared with an inflation adjusted 10 year average of $45.1 billion, confirming their expectation that earnings for both Q4 and FY16 will be a little ahead of the normal run rate, despite “an overall level of cat losses in 2016 which were very close to the long run average.”
