Arch estimates up to $145m COVID-19-related losses in Q1

Bermuda-based Arch Capital Group is expecting impacts on incurred losses and premium volumes on its business due to the increased market volatility and uncertainty created by the global COVID-19 pandemic.

The re/insurer estimated pre-tax net losses of $85 million to $95 million across property casualty insurance and reinsurance segments, for exposure to COVID-19 global pandemic claims as of March 31.

The company has also established a range of pre-tax net losses from $40 million to $50 million for its entire mortgage segment as a result of the financial stress created by the pandemic.

The loss estimates exclude the impact on the operating results of Watford Holdings.

"Incurred losses for the mortgage segment are largely a result of our loss reserve selections being set at the higher end of our range of indications," the company said. "Pursuant to GAAP, our estimates are based only on reported delinquencies as of March 31, 2020 for our U.S. primary mortgage insurance operations. The Company is not aware of any reported delinquencies being directly the result of recent events as of the end of the first quarter.

Arch expects to report net investment income of $110 million to $115 million for the first quarter of 2020. In addition, total return on its core investment portfolio (excluding Watford) is expected to be in the range of -0.65 to -0.95 percent.

The company said actual losses from these events may vary materially from the estimates due to several factors, including the inherent uncertainties in making such determinations and the evolving nature of this pandemic.