Bermudian insurance and reinsurance group Arch Capital Group Ltd. has revealed what it terms as “unusually high” levels of losses in its property facultative reinsurance book during the second-quarter of 2017.
The company says that it expects that second quarter 2017 pre-tax underwriting income will experience around a $38 million hit related to the performance of its property facultative reinsurance operations.
Arch said that the losses are related to a small number of property facultative reinsurance contracts written across multiple underwriting years and said that this is a unsually high” level of loss activity for the unit, adding that the property facultative reinsurance business has produced significant underwriting profits since it was launched in 2007.
Losses such as these are rarely contained within a single reinsurer and can often be shared across the market, so it will be interesting to watch for other companies with unusually high facultative reinsurance losses from Q2, particularly as Arch highlights these are from across a number of underwriting years.
Despite being facultative, it is hard to believe that Arch would have a loss such as this without there being some exposure across the market.
These losses could also reflect just how little room there is for events in reinsurance businesses right now, with the reduced pricing margins presenting little buffer before a book can turn less profitable.
