Peaks and troughs of reinsurance cycle
The impact of hurricanes Harvey, Irma and Maria, and major wildfires in the US, is clearly shown in a graph tracking combined ratios for reinsurance companies.
Data up to the end of the third quarter shows that this year is on track to be the worst year for reinsurers, in terms of combined ratio profitability metric, since 2005 when the US gulf states were hit by hurricanes Katrina, Rita and Wilma.
Combined ratio is calculated by taking the sum of losses incurred and dividing by earned premium. A ratio above 100 per cent means a company is paying out more money in claims and expenses than it is collecting from premiums.
The combined ratio for Guy Carpenter Reinsurance Composite is above 110 per cent after the first nine months of this year.
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