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Validus ‘prides itself on understanding risk’

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There is an underwriting philosophy behind Validus Holdings' ‘benign' quarter for catastrophe losses.

During the third quarter the Bermuda re/insurer did not incur any notable losses.

That boosted third quarter underwriting profits by 16.5 percent to $143.1 million.

The company's strategy is to maximise return on equity, subject to prudent risk constraints, on the amount of capital it exposes to any single event.

“It's not that we had no losses,” Validus CFO Jeff Sangster told The Royal Gazette in an interview.

“There were a number of events around the world in the quarter, it's just that they didn't reach our $30 million loss threshold.”

Mr Sangster pointed to losses from the German hailstorms, an offshore rig off Africa, the Kenya terror attacks, and smaller events including the San Francisco plane crash.

“Our book is broadly spread out,” he said.

Indeed, ratings agency Fitch has noted that Validus has produced an operating and underwriting profit in each year of existence, in a period during which many of its comparably rated peers have occasionally generated significant annual underwriting losses and sizeable negative operating income.

“That's a great track record we have had since our inception,” Mr Sangster said.

He said Validus “prides itself on understanding risk.

“We believe we understand (risk) better than most and as a result have been able to avoid the worst losses.”

The year 2011 saw the massive Japan quake and tsunami event, but: “We were underweight on those losses for a company of our size.

“We believed the price being paid for that type of risk was not commensurate with the risk we were taking and we declined that business.”

Mr Sangster added that Validus, which employs about 135 people here, will continue to have a significant presence in Bermuda and was “very dedicated” to its Bermuda domicile.

Validus Holdings said last week it made a profit of $183.4 million, or $1.77 per diluted common share for the three months ended September 30, 2013, compared to $207.3 million, or $2.11 per diluted common share last year. The re/insurer said net operating income for the three months ended September 30, was $155.2 million, or $1.50 per diluted common share, compared to $170.6 million, or $1.74 per diluted common share, last year.

Validus CFO Jeff Sangster
Risky business: A man holds his baby as they are scanned for levels of radiation in Koriyama, Fukushima Prefecture last March after the tsunami damaged two nuclear reactors.

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Published October 30, 2013 at 9:00 am (Updated October 30, 2013 at 12:32 pm)

Validus ‘prides itself on understanding risk’

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