Arch estimates Covid-19 hit
Arch Capital Group Ltd has estimated catastrophe losses of up to $225 million for the second quarter — most of them related to Covid-19.
The Bermudian-based company said the estimated loss range of $205 million to $225 million relates to its property and casualty insurance and reinsurance business operations and does not include its mortgage insurance business.
Arch estimates exposure to pandemic-related claims of between $170 million and $180 million for the April to June period. In the first quarter, Arch recorded a Covid-19 hot of $87 million.
Losses related to US civil unrest claims in the second quarter are estimated at $35 million to $45 million.
Arch's loss estimates are net of reinsurance recoveries and reinstatement premiums.
Mortgage insurers including Bermudian-based Essent Group have indicated expected losses related to rising delinquency rates, particularly in the US.
Arch said it intends to give an indication of losses for its significant mortgage business when it reports second-quarter financial results, scheduled for July 29 after the markets close.
Arch stated: “The Covid-19 pandemic leads to direct and indirect impacts on the company's businesses, most notably observed in the company's mortgage segment in the form of elevated delinquency rates and potentially higher loss experience.
“For US primary mortgage insurance, loss reserving under GAAP [generally accepted accounting principles] is based on reported delinquency rates. Segregating estimated losses due to the pandemic from overall mortgage segment estimated losses would require knowledge of the number of delinquencies specifically attributable to Covid-19. As this exercise cannot be performed accurately, the company will not report Covid-19 provisions separately from overall mortgage insurance loss provisions.”
Arch cautioned that “there are significant uncertainties surrounding the ultimate number of claims and scope of damage resulting from the pandemic”.