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Arch sees Q2 cat losses at up to $225mn

15th July 2020 - Author: Luke Gallin

Arch Capital Group Ltd. has announced estimated pre-tax net catastrophe losses of $205 million to $225 million across its property casualty insurance and reinsurance operations in the second-quarter of 2020.

ArchThe Bermuda-based insurer and reinsurer’s Q2 catastrophe loss range is net of reinsurance recoveries and reinstatement premiums, and includes the impacts of the COVID-19 pandemic, civil unrest across the U.S. and other catastrophic events.

The large majority of the company’s loss estimate relates to the ongoing COVID-19 pandemic. Arch Capital’s range estimate for exposure to COVID-19 global pandemic claims stands at $170 million to $180 million for the second-quarter of 2020, which is in addition to the $87 million COVID-19 hit recorded in Q1 2020.

Additionally, the company has announced a range of estimates of $35 million to $45 million for losses related to civil unrest claims across the U.S. and other 2020 second-quarter catastrophic events.

Of course, Arch is a prominent player in the mortgage insurance space, an area that has also been hit by the pandemic. However, this loss estimate only includes the firm’s insurance and reinsurance segments and Arch says that it will report on the mortgage segment when it releases its Q2 2020 results.

Expanding on this, Arch says, “The COVID-19 pandemic leads to direct and indirect impacts on the Company’s businesses, most notably observed in the Company’s mortgage segment in the form of elevated delinquency rates and potentially higher loss experience.

“For U.S. primary mortgage insurance, loss reserving under GAAP is based on reported delinquency rates. Segregating estimated losses due to the pandemic from overall mortgage segment estimated losses would require knowledge of the number of delinquencies specifically attributable to COVID-19. As this exercise cannot be performed accurately, the Company will not report COVID-19 provisions separately from overall mortgage insurance loss provisions.”

The Bermuda-based re/insurer adds that there remains significant uncertainties surrounding the ultimate number of claims and scope of damage resulting from the pandemic.

This estimate includes losses only related to claims incurred as of June 30th, 2020, but exclude the impact of the pandemic on the operating results of Watford Holdings Ltd., explains Arch.

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