Reinsurers’ earnings for the year have probably already been wiped out by industry catastrophe losses of more than $100 billion — and their capital could also be hit.

That is the view of analysts at S&P Global Ratings, who believe that an improvement in reinsurance rates may follow in the upcoming January renewals.

“As reinsurers are coping with their third-quarter catastrophe-related losses, their capital could take a hit,” S&P stated in its report, released today, entitled Third-quarter catastrophe losses are becoming a capital event for reinsurers.

“Although our ratings are supported by robust capital adequacy levels, we would consider a reinsurer that incurs large losses that translate into capital erosion as an outlier that could be subject to a negative rating action.”

Several Bermuda reinsurers have announced their preliminary loss estimates for the third quarter. Among the more notable are XL Group ($1.48 billion), Everest Re ($1.2 billion), RenaissanceRe ($625 million) and Axis Capital ($617 million).

The Association of Bermuda Insurers and Reinsurers has estimated that Bermuda entities will cover at least a quarter of the estimated $100 billion in insured losses from hurricanes Harvey, Irma and Maria.

S&P said global reinsurers would foot the bulk of the bill. And with capital of $605 billion, including $89 billion of alternative capital as of June 30,2017, they were well prepared to take the strain.

The report described the third-quarter catastrophes as “just a speed bump” for the thriving catastrophe bond market, which is predominantly based in Bermuda.

S&P has downgraded only one cat bond — the Everest Re-sponsored Kilimanjaro Re 2014-I Class B.

S&P said the main reason for the lack of impact on cat bonds it rates, despite the massive economic losses caused by the string of disasters, a large proportion of the impact was not covered by private insurers. This included most of the flood damage and much of the devastation in the Caribbean.

S&P saw this protection gap as an opportunity for the industry.

“We think that the insurance industry and the natural catastrophe investor base have an opportunity to expand into these hitherto non-insured exposures and regions, and given the appropriate returns, can provide a new source of earnings for themselves and protection for many currently uninsured people and regions,” S&P stated.

The rating agency said that “without a doubt, reinsurance pricing will increase for the affected regions and business lines”, while US national pricing was likely to move higher too.

Increases in global reinsurance prices are less certain. S&P expects global prices to increase by zero to 5 per cent at January 1 renewals.

“Given the magnitude of the losses, we expect reinsurers to hold flat on pricing at the very least, but most will likely demand higher risk premiums at this time,” S&P said.