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KBW estimates Q2 global cat losses at $11.8bn

14th July 2020 - Author: Matt Sheehan

Analysts at KBW have estimated that P&C reinsurers’ global catastrophe losses will total $11.8 billion in the second quarter of 2020, stemming mostly from difficult North American weather and civil unrest in the US.

KBW LogoOverall, Q2 losses should include bad weather, civil unrest, and significant (but manageable) COVID losses, but no major natural catastrophes, KBW said.

The firm believes actual claim counts will be down markedly for most lines, but the impact on actual loss picks will probably range from material for short-tailed lines like personal auto to modest for longer-tailed lines like general liability and workers compensation.

It also expects fading net reserve releases overall reflecting worsening loss trends and recent years’ more aggressive loss picks, and occasional strengthening on legacy issues.

Because of the uncertainty and likely-extended litigation associated with the P&C industry’s exposure to COVID, Q2 loss reserves should include significant subjectivity, which implies conservative, but ultimately manageable, losses in the quarter.

KBW does not expect aggregated reported losses to approach the more pessimistic industry losses of $100 billion or higher.

Improved equity valuations and lower interest rates will also boost book values, analysts added, with some offsets from lagged Q1 alternative investment reporting.

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