Loss reserve strengthening in U.S. casualty reinsurance is to push Bermuda-based Watford Holdings Ltd. to a net loss in the fourth-quarter of 2019.
The firm has announced a strengthening of net loss reserves of approximately $28 million across the current and prior accident years.
Watford states that the reserve strengthening is in response to elevated reported losses in the quarter, mainly in U.S. casualty reinsurance, and also known casualty exposures where losses are believed to have been incurred, but have not yet been reported.
Primarily, the loss reserve strengthening relates to two large casualty reinsurance contracts, one of which is in run-off, while the other has been renewed at increasingly smaller participations over recent years.
At the same time, Watford expects that catastrophe losses will impact its fourth-quarter underwriting results by roughly $5 million.
In spite of the increase in loss reserves, Watford still expects to report positive growth in book value per share of more than 3% for the period, which it says is a reflection of strong investment income and share repurchases.