Deutsche Bank has turned positive on its European reinsurance pricing outlook after hurricanes Harvey, Irma, Maria, and the Mexican earthquakes caused widescale market disruption, with an expected $95 billion global market impact.
Deutsche Bank said “this will be by far the biggest individual driver for the quarter and given the magnitude of it we do not expect the companies to try and mitigate those effects on a quarterly basis as the natcat losses will be simply too big.”
The $95 billion in insured losses are considered too high to be mitigated by individual reinsurers through high levels of reserve releases, or high levels of realised gains, turning Q3 results into a challenging and ugly quarter for the industry.
“This should be no surprise to markets and should support also the upcoming pricing discussions with clients,” said Deutsche Bank, confirming the growing consensus among industry experts.
Evan Greenberg, the Chairman and Chief Executive Officer (CEO) of global re/insurer Chubb, recently added his voice to the reinsurance executives stating insurance and reinsurance markets are at the start of a firming price environment, after years of a softened market state.
Hannover Re, however, is the exception to the European big four as its expected to mitigate some loss impact with its unused €191 million major loss budget from the first-half of 2017, allowing for an additional €100 million of reserve releases and €50 million additional of disposal gains.
This brings Deutsche Bank Q3 estimates for Hannover Re to a level which would allow its parent company, Talanx, to report a quarterly loss.
Analysts based the Q3 natural catastrophe losses on a $95 billion market loss for the three hurricanes and two Mexico earthquakes, and added about 40% of the respective budget to reflect other events like U.S. tornadoes, European severe weather events and typhoons in Asia.
Firms aren’t expected to tap the stand-alone Q4 major loss budget, Q3 estimates are based solely on what Deutsche Bank considers as Q3 budget, explained the firm.