Insurance and reinsurance firm XL Group, owner of the XL Catlin brand, has estimated that its losses from third-quarter catastrophes including hurricanes Harvey, Irma and Maria, will be around $1.5 billion before tax.
XL forecasts $1.33 billion of losses from the hurricanes, Harvey, Irma and Maria, with the addition of other events including the Mexican earthquakes and typhoon Hato taking the bill to $1.48 billion, pre-tax and net of reinsurance, reinstatement and adjustment premiums and redeemable non-controlling interest. After-tax the bill will come down to roughly $1.35 billion, the firm said.
XL Chief Executive Officer Mike McGavick commented on recent events and their impacts on his company; “Our hearts break at the havoc caused by these events; the terrible pain and anguish suffered. We are proud of our people, some of whom have had their own losses to deal with, who are working tirelessly with our partners to help our clients in these difficult times.
“And, as ever, the problem of underinsurance is again laid bare, afflicting especially those already less well off. It is appalling, and all of us with expertise to offer must bend our minds to solving these systemic failures.
“In terms of the effects on XL itself, given the specific nature of the events themselves our estimated losses are largely in line with our expectations, and our capital strength and talented teams ensure that we remain positioned to continue solving the risk needs of clients and brokers.
“As for market conditions, risk awareness has changed due to these events, and this in turn should cause the market to move towards more realistic and sustainable pricing for the risks undertaken.”
XL sees hurricanes Harvey, Irma and Maria as representing an insurance and reinsurance market loss in a range from $75 billion to $90 billion, with each contributing approximately 25%, 40% and 25%, respectively to its third-quarter catastrophe bill and the other 10% from the additional events.
XL said that it continues to have “significant catastrophe reinsurance protections” in place for the rest of 2017 and into 2018, including catastrophe bonds, some of which provide coverage through 2019 as well.
The company’s loss estimates have had a mixed reception from equity analysts, with some seeing them below expectations and others above.
A number expressed some concern that other reinsurers have been estimating the total cost of the three hurricanes at more than $100 billion, compared to XL’s estimate which is at the lower end of expecations at up to $90 billion, which could suggest the estimates have room to rise.
The loss, at the moment, is seen as around a 10% hit to book value, which is not considered sufficient for XL to need to raise any additional capital.
