Loss creep from 2018’s hurricane Michael was largely passed on to the reinsurance providers or retrocessionaires backing Hiscox’s aggregate protection in the second-quarter of the year, the company confirmed to us today.
Hiscox revealed in a trading update on Friday that its catastrophe losses had continued to creep in the second-quarter of the year, resulting in a lowering of its forecast for profit for the half-year results that it will report soon.
The company hardened its reserves for typhoon Jebi, hurricane Michael and its risk excess book by around $40 million, but as it transpires the company has been receiving reinsurance or retrocession support to assist with the impact of the creep.
Hiscox had already begun to eat into its aggregate reinsurance protection in the first-quarter of this year, largely on typhoon Jebi exposure.
But in the second-quarter of 2019 it was continued loss creep associated with hurricane Michael that has dented that aggregate layer of its reinsurance and retro coverage even further, the company confirmed to us today.
As a result of this the company now benefits from significant further coverage under its aggregate reinsurance for any further loss creep from these prior year catastrophe events.
Hiscox told us that it expects that any future loss creep from hurricane Michael will now be contained within its aggregate reinsurance layer, while the same is likely true for further typhoon Jebi loss creep as well.
Meanwhile, the risk excess segment of its book, where Hiscox has also experienced adverse development, was now a full limit loss, according to its CFO Aki Hussain, which means no further impact can be felt there.
Hiscox’s share price tumbled more than 5% on Friday after the profit warning was announced, but by the end of day today (Monday 15th) had recovered nearly all of that lost value suggesting the market is relatively unconcerned and recognises the protection Hiscox has in place.