Goldman Sachs expects a muted 1/1 renewal season with flat pricing across the property and casualty lines.
Meanwhile, the firm says the main questions around catastrophe losses in 4Q18 will likely be the scale of insured losses from the wildfires currently raging in California, and loss creep from last year’s hurricane Irma and this year’s Japan storm and flood losses.
There are currently three wildfires raging in California: the Camp fire in Northern California, the Woolsey fire in Malibu and the Hill fire in Thousand Oaks, Southern California.
Sachs says it remains too early to gauge incurred losses from these events, but the extent of the fires and their locations foretell losses that are far greater than those incurred by 3Q18’s wildfires.
As of now, 4Q18 will likely be dominated by October’s hurricane Michael and by California wildfires, says Sachs.
Michael is estimated as a roughly $5 billion to $10 billion insured loss event, but more recent estimates appear to be converging near the upper end of this range.
Since it impacted mostly Florida, where reinsurance attachment points are low, Sachs expects reinsurers to incur a large portion of insured losses from this storm.
The firm also notes that Michael losses were more wind and surge oriented (as opposed to flood related) and should therefore drive insured losses as a percentage of economic losses up.
Still, as of today, overall 4Q18 catastrophe losses, including from Michael, remain just within the average expected range for the fourth quarter.
