Reinsurance News

Swiss Re’s Cyclone Debbie losses reveal Australian market share growth: Deutsche Bank

24th April 2017 - Author: Staff Writer

Swiss Re was hit with a lion’s share of $350 million Cyclone Debbie losses in Q1, after the firm expanded its Australian market share to nearly double its 2011 size, said Deutsche Bank analysts in their Q1 European reinsurance market report.

The $350 million Cyclone Debbie blow reveals a Swiss Re market loss share of 27% up from 2011 Cyclone Yasi losses of $145 million, or 14.5% of Yasi market shares.

With Swiss Re being one of the lead reinsurers in the region along with Munich Re, the analysts said the firm’s high loss share was expected to be impacted by; “a higher share of commercial business as well as a higher share of XL-treaties with low attachment points.”

Cyclone Debbie loss statistics highlight Swiss Re as the only major European reinsurer to have significantly grown its Australian market penetration in recent years.

Other reinsurers appear to have kept stable premium levels in the region since 2011, with the exception of SCOR who’s loss share “grew slightly along with rising premium levels”, but its losses are still expected to remain “overall at a low-level and in absolute numbers to remain behind its European peers.”

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According to Deutsche Bank estimates, Cyclone Debbie losses wreaked havoc for Swiss Re’s Q1 standalone natcat budget of an estimated $1.15 billion –  fully blowing out and far surpassing the firm’s budget expectations for the first quarter by 148%.

“This turns into a Q1 budget of USD219m against our natcat loss estimate of USD325m for P&C, i.e. having the budget utilized by 148%,” said Deutsche Bank.

For other European reinsurers the cyclone led to higher than expected Q1 losses – particularly Munich Re, who fell prey to Cyclone Debbie devastation with a natcat budget expected to be utilized by 137%.

Hannover Re and SCOR came off with hard-hitting, but less dramatic budget losses; “Hannover Re will continue with its results smoothing and fully book the major loss budget, which will also keep Hannover’s results at “normal” levels. For Hannover Re, we factored in a loss from Debbie of EUR28m and from major losses of EUR90m, but expect the company to book the full major loss budget of EUR206m and move the un-used part of EUR116m forward as intra-year buffer.

“For Scor, we expect natcat losses of EUR41m, of which EUR25m should come from Debbie. This translates into an impact on the Q1 combined ratio of 3.2% and a FY budget utilization of only 13%.”

The heavy Cyclone Debbie losses felt by European reinsurers in Q1 relate, on a global scale, to an above-average year for reinsurance payouts.

Latest Impact Forecasting data shows that U.S. severe thunderstorms and convective weather made the first-quarter of 2017 the most costly Q1 on record for this peril, Artemis reported.

And natural catastrophe events hitting the globe this year have been on the rise, compounding to shake the re/insurance industry with insured losses amounting to an estimated total of $5.7 billion so far.

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