Reinsurance News

Hurricane Ian a “very expensive earnings event,” says KBW

3rd October 2022 - Author: Matt Sheehan

Analysts at KBW have said they expect Hurricane Ian to represent a “very expensive earnings event” for the insurance and reinsurance companies it covers, rather than a capital event.

Hurricane Ian over the Gulf of Mexico at 4:26pm on September 27th. Source: NOAA via AP

Following new re/insurance industry loss estimates of $63 billion by KCC and $42-57 billion by Verisk, KBW has made put together tentative figures for the losses that individual re/insurers could be looking at, based on their market share in the areas impacted by Ian.

These figures are based on an assumed industry-wide loss of $50 billion, including $5 billion of personal and commercial auto physical damage losses, $5 billion of inland and ocean marine losses, and $40 billion of losses for all other catastrophe-exposed lines of business.

Using these assumptions, KBW believes that Berkshire Hathaway will face the highest level of losses from Hurricane Ian at $1.40 billion, representing 0.2% of the company’s $469.65 billion of common equity.

Behind this was Chubb, which could face $1.02 billion of losses, according to KBW, or 1.6% of its $51.67 billion of common equity.

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The third-highest level of losses is faced by Arch Capital Group at $732 million, representing 5.2% of common equity, followed by Progressive with $625 million, or 3.1% of common equity, and Allstate at $578 million, or 2.5%.

Companies that could see the biggest relative impact to their finances include RenaissanceRe, whose $500 million loss – as calculated by KBW – would represent a huge 9.0% of its common equity.

Other firms that could be reporting heavily impacted Q3 results include The Hanover, whose assumed $200 million loss would represent 6.1% of its common equity, and Everest Re, whose $563 million loss would represent 5.6% of its common equity.

KBW did stipulate that its estimates are only preliminary figures based on the information available at this time, and will almost certainly change as the view of losses and exposure from Hurricane Ian develops.

However, analysts also added that Q3 results will likely be further impacted by other significant catastrophe losses, including Hurricane Fiona, Typhoon Nanmadol, domestic wind and hail losses, and reserve additions to Q2 French hailstorm losses.

“We’ve used our best — always imperfect — judgment in the absence of precise disclosures, for matters like probable maximum losses, reinsurance participations, relevant aggregate reinsurance coverage/exposure, individual company reserving conservatism, changing books of business, and so on,” KBW stated.

“We have almost certainly gotten some things wrong, and we expect (potentially significant) updates as more information becomes available.”

Nevertheless, analysts concluded that losses will almost certainly sustain “very significant” property-catastrophe reinsurance rate increases in 2023, despite being subject to change.

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