The specialist Lloyd’s of London insurance and reinsurance marketplace has suspended the release of profits to the market in light of the uncertainty surrounding potential losses from hurricane Maria, on the back of hurricanes Harvey and Irma.
Lloyd’s announced recently, as part of its first-half 2017 results, that it expects net claims from Harvey and Irma to be roughly $4.5 billion, but said it was too early to provide a preliminary loss estimate on hurricane Maria during its analyst call.
During the Lloyd’s interim 2017 analyst call, Lloyd’s executives emphasised this point, but were eager to note uncertainty surrounding the event.
“Regarding Maria, like the rest of the industry, we are saying it’s simply too early to make a call on the loss. There’s very few estimates around the market from modellers, brokers and carriers, and we’re assessing and discussing it…but it’s just too early to put a sensible number on potential losses,” said John Hancock, the Lloyd’s Performance Management Director.
Despite this, and highlighting just how uncertain the potential insurance and reinsurance industry losses from the storm is, Lloyd’s Chief Financial Officer (CFO), John Parry, added; “One of the actions we have taken is to suspend release of profits to the market, pending assessment of the claims estimates for Irma and Harvey.”
This is perhaps not so surprising, with a recent insured loss estimate from AIR Worldwide for Maria being as high as $85 billion, and analysis from Keefe, Bruyette & Woods (KBW) suggesting Lloyd’s could have an 8% market share to Maria losses in Puerto Rico.
However, recent loss estimates from RMS and Karen Clark & Company are far lower than that of AIR Worldwide.
Lloyd’s expressed uncertainty surrounding the AIR number, with Parry explaining that it was a surprise that it was so high, and that Lloyd’s was speaking to other catastrophe risk modellers in the industry to try to grasp a better understanding of the loss.
Lloyd’s doesn’t expect Maria, combined with hurricanes Harvey and Irma, and the recent Mexico earthquakes, to impact its Solvency Capital Requirement (SCR), nor does it anticipate the events having any impact on its central fund, which it says remains in a solid state.
Commenting on the storms, Parry said; “For Lloyd’s, the exposure is spread across a number of syndicates, and we hold significant capital for U.S. windstorm. So actually, this loss is being matched up well against the capital that we hold.”
Lloyd’s was also questioned on whether it felt recent events would be enough to drive a turn in the market.
According to previous research undertaken by Lloyd’s and highlighted by Chief Executive Officer (CEO), Inga Beale, the removal of around $200 billion of capital is needed to turn the market. And, even with the uncertainty surrounding Maria, on top of Mexico quakes and hurricanes Harvey and Irma, Beale said there’s “no concern at the moment that we’ve got this market turning event situation.”
“What I would say is the global insurance market is really far-reaching now…The world is very different, with many, many regions of the world growing and many regions having big, big domestic markets. And therefore I think the whole dynamic of the global insurance arena has changed a lot over the years.
“We’ve got an abundance of capital out there at the moment, hence we based our comments on the research, and that’s the feeling, that the old way of thinking about cycles and insurance I think are behind us, to a certain extent,” said Beale.
