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Uri could signal above-average cat loss year: Barclays

15th March 2021 - Author: Matt Sheehan

Analysts at Barclays believe that the unprecedented level of losses caused by February’s Winter Storm Uri in the US could be “setting the stage” for another above-average catastrophe year for re/insurers.

Current industry loss estimates put the cost of Uri in the $15 billion to $18 billion range, which Barclays notes is not far short of the $20 billion to $25 billion loss range of 2017’s Hurricane Harvey.

However, the losses are being booked at a time of year when budgets typically incorporate much smaller natural catastrophe claims.

It therefore seems likely that re/insurers with exposure to the storm will exceed their Q1 cat budgets, which may be viewed as an ill omen for the year.

Barclays expects the bulk of claims costs from Uri to come on the personal lines side, and expects large reinsurers and Swiss Re in particular to have comparatively high exposure versus the London market.

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Winter storm Uri caused significant disruption across a number of southern U.S. states last month, especially Texas, which has faced record-low temperatures and experienced several inches of snow.

Karen Clark & Company (KCC) has put its insurance and reinsurance industry loss for U.S. winter storm Uri at $18 billion, while AIR Worldwide believes that the event was likely to drive insured losses of more than $10 billion.

Analysts at KBW expect losses from Winter Storm Uri to be managebale, but noted that they are likely to help sustain property catastrophe reinsurance rate increases through the mid-year renewals period.

S&P agreed that carriers should be able to comfortably absorb the shock due to their robust capital levels and reinsurance protection.

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