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Aggregate reported losses to date from Q3 nat cats pass $11bn

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The sum of net natural catastrophe losses in Q3 reported by companies across the (re)insurance industry to date has already hit $11.4bn, analysis by Insurance Insider has revealed.

With third-quarter earnings season now well underway, a clearer picture of which (re)insurers have been hit hardest by major catastrophe losses in recent months has begun to emerge.

A review by this publication of quarterly earnings reports released so far – as well some estimates previously announced by companies which are yet to formally report this quarter – shows that at this point, it is Bermudian carriers that have taken the biggest hits from Hurricane Ida and the European floods in July.

The Q3 loss numbers are under particular scrutiny by (re)insurers as they gear up for the crucial 1 January reinsurance renewals. They also come amid increasingly noisy debate around cat risk in the context of climate change, and whether the industry is pricing well enough for increased frequency and severity of loss events.

Hurricane Ida

As at 10:00 BST on Friday, this publication had compiled estimates of losses resulting from Hurricane Ida from 14 global listed insurers and reinsurers. In total, these firms have reported $5.3bn in net losses from the hurricane, which made landfall in August.

Munich Re has disclosed the largest Ida net loss so far in dollar terms – reporting an estimate of $1.4bn (€1.2bn) to the market on 19 October – but it is Bermudian reinsurer RenRe which sustained the most significant hit to equity from the hurricane.

The $438mn net negative impact on its underwriting result relating to the hurricane equated to 6.1% of its total equity balance at the end of the second quarter of 2021.

Throughout this analysis, we have used total equity balances collated by S&P Capital IQ Pro, which include shareholders’ equity and any minority interests as standard. In the case of RenRe – which classifies its non-controlling interests (NCI) as a liability on its balance sheet, as it is redeemable – NCI has not been included, and cat losses attributable to NCI have therefore also been excluded.

Fellow Bermudian Everest Re reported the second largest net loss from Ida as a proportion of equity, with the $415mn it estimated across its reinsurance and insurance segments on 14 October equalling 4% of total equity.

The top five in our loss table by hit to total equity so far are all significant reinsurance market players – lending weight to early intelligence post-landfall that Ida would be more of a reinsurance event than Hurricane Laura, which hit Louisiana in 2020.

Among US insurers which have already reported, only Allstate ($631mn, or 2.2%) and The Hanover ($75mn, or 2.4%) have experienced losses of more than 2% of total equity.

European floods

July’s floods in Germany and elsewhere in Europe were generally less damaging for the (re)insurers which have reported so far, although again a Bermudian carrier – this time SiriusPoint – sustained the joint largest hit to equity (3.2%), alongside French (re)insurer Scor.

In total, Insurance Insider has compiled estimates of net losses arising from this natural catastrophe from 12 carriers, with the sum of those estimates totalling $3.4bn.

In dollar terms, Swiss Re has so far reported the biggest hit from these floods, after announcing an estimated $520mn loss on 5 October.

All-in Q3 tally

RenRe’s sizeable estimates for both Ida and the European floods mean that it has one of the highest overall cat losses relative to equity. This 10.1% hit to equity includes $80mn of other weather-related losses booked in the quarter.

There are, however, a number of companies which have not provided specific estimates for named events that also rank highly on an aggregate basis.

On 21 October, for example, Lancashire disclosed that its best estimate for total net losses relating to Hurricane Ida, Storm Bernd and other catastrophes in Q3 fell in the range of $165mn to $185mn. The midpoint of this range is equivalent to 11.3% of its second-quarter total equity balance.

American carrier UPC, which reports its cat losses in the same manner, has disclosed a figure equal to 10.3% of equity.

Across the 28 companies tracked by this publication which have published figures so far, aggregate net losses from all natural catastrophes total $11.4bn. Cumulatively, those carriers held $541.7bn of total equity at 30 June 2021.

To avoid double counting, carriers that only reported gross loss estimates from Q3 nat cat events have been excluded from this analysis. Included among those carriers are Provinzial and Gothaer.

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