On the back of a stronger USD and rising U.S. premium levels, European reinsurers U.S. hurricane exposure is expected to be up somewhere around 5%, with Swiss Re having the highest exposure, according to analysis by Deutsche Bank.
The 2017 Atlantic hurricane season is expected to experience an average or above-average level of activity, and based on 200 year exposures (as of 2016), Deutsche Bank expects U.S. hurricane exposures for “the Euro-denominated reinsurers to be up c.5%, based on a stronger USD and from rising US premium levels.”
The impacts of a stronger currency in the U.S. and also that European reinsurers have been seen to underwrite more U.S. hurricane exposed business, suggests that exposure levels are higher for the 2017 season.
Based on the latest reported 200 years exposures, as of 2016, Deutsche Bank explains that global reinsurer Swiss Re’s has the highest exposure, although this could decline slightly for 2017E, in response to a declining premium base. Munich Re has the second-highest exposure of the big four European reinsurers, although in relative terms this could be slightly higher than Swiss Re’s, explains Deutsche Bank.
“We expect also Munich Re’s exposure to have gone up slightly, as it gained a major single contract in the US in 2017, which should have also increased US hurricane exposure.
“Broadly speaking, a 200y hurricane would wipe out c.200% of Munich Re’s and Swiss Re’s profit base and wipe out c. 30% of the solvency capital,” says Deutsche Bank.
Hannover Re and SCOR still have significantly lower exposures to U.S. hurricanes than their larger peers, explains Deutsche Bank, and, although French reinsurer SCOR is carefully growing its U.S. exposure, “we see only a small impact from this on US hurricane exposure.”
The chart below, provided by Deutsche Bank, shows the market share on insured loss of North Atlantic hurricanes, and includes Berkshire Hathaway, which substantially reduced its exposure when prices started to fall.
