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Berenberg estimates Swiss Re’s cat losses will exceed 2021 budget

14th October 2021 - Author: Katie Baker

Analysts at investment bank Berenberg have reduced its 2021 earnings per share (EPS) estimates by 20% as they expect catastrophe losses will exceed the cat budget again this year.

berenbergThis is due to the impact of hurricane Ida and the European floods.

Currently, Swiss Re is the only European reinsurer to provide a preliminary estimate of its claims burden from hurricane Ida, which hs been marked at approximately $750m.

This is based on a total insured market loss in the range of $28bn-30bn and implies a market share for Swiss Re of c2.5%.

In contrast, Munich Re, Hannover Re and SCOR are yet to provide a loss estimate due to the ongoing uncertainty about whether it is one or two events that have to be considered and the lack of claims notifications that have been reported so far.

RMS

In addition to the Ida loss, Swiss Re has also disclosed that it expects a $520m claims burden from the July floods in Europe. This is based on total insured market losses for the industry of $12bn.

In aggregate, Berenberg estimates that year-to-date global insured cat losses are now higher than the $81bn recorded last year, which was the fifth-highest cat loss year on record.

Despite this year being heavy for cat losses, Berenberg believes that the outlook for the January renewals continues to be attractive.

Analysts believe that rate increases in the low to mid-single-digit range should be achievable providing the desire for growth does not outstrip the current pricing discipline that characterises the market.

That said, investors remain sceptical that cat pricing is adequate, especially if there is continued upward pressure on the frequency and severity of losses due to climate change.

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