Catastrophe losses stack up for reinsurers
Bermudian reinsurers expect to pay out hundreds of millions of dollars in claims related to hurricanes and wildfires during the third quarter.
RenaissanceRe, Axis Capital and Arch Capital each gave estimates on losses that will impact their third-quarter results, to be reported within weeks.
The three companies estimated combined losses in the range of $740 million to $790 million, primarily driven by losses from hurricanes Laura and Sally, as well as the wildfires in California, Oregon and Washington.
RenRe estimated a net negative impact of $325 million, while Axis expects pretax losses of between $225 million and $255 million. Arch estimates pretax catastrophe losses of $190 million to $210 million for the quarter.
Other natural disasters that added to insured losses during the quarter were the August 2020 derecho, a severe weather event which impacted parts of the US Midwest with tornadoes, hail and torrential rain, as well as Hurricane Isaias and Typhoon Maysak.
Axis said its estimate also included losses related to the huge explosion in Beirut in August, when ammonium nitrate stored at the city’s port ignited, leaving more than 200 dead and causing about $15 billion in property damage.
Axis added that it was seeing “accelerating improvements in pricing across most insurance lines of business”.
Arch specified that its expected losses included $10 million to $15 million related to the pandemic. The company said this was in addition to the $260 million Covid-19 loss it estimated in its second-quarter earnings report.
Kevin O’Donnell, RenRe’s chief executive officer, said: “We extend our sympathies to all those affected by the quarter’s catastrophic events.
“This elevated wind and wildfire season reinforces the value of reinsurance in ameliorating the growing impact of climate change.
“Protecting communities from climate-related disaster is an important part of our purpose, which we fulfil through the rapid payment of claims to our customers."
Despite the losses, RenRe said it expects to report “modest net income”, but an operating loss.
RenRe also noted further catastrophe activity since the third quarter ended on September 30.
The company noted that Hurricane Delta, a Category 2 storm, made landfall on the Yucatán Peninsula on October 7 and subsequently in Louisiana on October 9, causing widespread flooding and damage, including in the region impacted by Hurricane Laura. Additionally, the wildfires impacting California are ongoing.
“The company is in the preliminary stage of assessing the impact of Hurricane Delta and the continuing impact of the California wildfires beyond the third quarter of 2020,” RenRe stated. “The estimated losses for these events will be reported in the company's fourth-quarter financial results.”
RenRe is scheduled to report third-quarter results on October 27, while both Axis and Arch are due to release theirs on October 29.