Bermudian reinsurance firm RenaissanceRe warned its shareholders that the devastating wildfires that have impacted the state of California in recent weeks could result in a significant, perhaps material, impact to the company.
Based on its risk modelling and an initial assessment of the California wildfires, RenaissanceRe said that it anticipates that the events will hit its financial results in what will be a significant way. The financial impact “could be material” the reinsurer explained.
The reinsurer said that its investigations of potential losses from the California wildfires are at a very preliminary stage, with its assessment based on the initial industry insured loss estimates, as well as market share analysis, risk modeling and a review of its in-force contracts and uncertainties relating to reinsurance recoveries.
As a result RenRe said it is not possible to provide an accurate estimate of the eventual financial impact of the California wildfires, as so much of the information remains preliminary at this stage.
It’s to be expected that reinsurance firms like RenaissanceRe which have large market shares in catastrophe exposed regions of the world will be hit by the wildfires. Preparing shareholders and analysts in advance for the potential losses that will be reported in Q4 results is a prudent step, as nobody likes surprises.
A significant loss is almost assured, while industry estimates are now suggesting that the eventual bill for the insurance industry will be over $6 billion and perhaps as much as $8 billion. As a result reinsurance players will find this erodes some of their fourth-quarter profitability, but whether that will be material or just attritional, remains to be seen.
