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Large loss tally reaches $3.2bn as Q3 earnings season continues

As the third-quarter earnings season continues to dominate the news flow, a running tally compiled by The Insurance Insider shows carriers have collectively reported around $3.2bn in pre-tax Q3 net catastrophe and other large losses so far.

Third-quarter losses – mainly from Hurricane Dorian and Typhoon Faxai – have hit (re)insurers following a relatively benign first half of the year for catastrophe activity.

The analysis of 13 carriers which had provided catastrophe and other large loss figures as part of their quarterly earnings as of 4 November found they were impacted by $3.2bn in claims stemming from these events in Q3. However, this figure is set to rise with many carriers yet to reveal their results.

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Swiss Re estimated industry-wide losses from Dorian at $4.5bn and Faxai at $7bn. Meanwhile, the reinsurer itself – which has a large market share in the areas affected by the two events – posted losses of $300mn and $460mn in its P&C reinsurance business, for Dorian and Faxai respectively.

Large losses for the Swiss Re Group totalled $1.1bn for the quarter. This was highest out of all 13 companies in the peer group and corresponds to all large loss events during the quarter including Dorian, Faxai and the liquidation of Thomas Cook.

A somewhat-better gauge on how these cat losses affects a company is to compare them against shareholders’ equity.

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Swiss Re’s large losses amounted to 3.5 percent of its shareholders’ equity.

In its third-quarter trading update Hiscox said it had reserved $165mn for claims from Faxai, Dorian and Typhoon Hagibis, though the latter fell in the fourth quarter. Hiscox further added that the $165mn “is materially in excess of the group’s catastrophe budget for the second half”.

This represents around 7 percent of Hiscox’s shareholders’ equity.

Elsewhere, AIG swung to a profit of $505mn in Q3, even after it took $511mn in catastrophe claims during the period. However, these losses made up only 0.8 percent of shareholders’ equity.

For the same period in 2018, AIG took a $1.6bn hit from catastrophe losses.

Average industry loss estimates for Q3 natural catastrophes – notably Dorian and Faxai – totalled $13.7bn. This was calculated using industry loss estimates provided by catastrophe modelling firms as well as industry estimates individual carriers have produced.

Using AIR Worldwide and RMS estimates, Hagibis is expected to result in $12bn of industry losses.

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