Cat losses set to widen for P&C re/insurers: Credit Suisse

Nat cat losses are set to increase from what companies have so far reported for the third quarter as the sum of these preannouncements still don't appear to add up to even the lower end of expected third-quarter industry losses of $75 billion, Credit Suisse analysts said in an Oct. 17 research note.

Many market observers expect more than $100 billion in insured catastrophe losses in the third quarter.

Because of the disparity between loss pre-announcements and total expected losses, Credit Suisse analysts believe that the initial catastrophe estimates are likely not the best indicator of ultimate exposures, “especially in a season as complicated as this one with multiple events”.

Hurricane Harvey has caused particularly flood losses while Irma, and Maria have impacted North America particularly through strong winds. In addition, there were two earthquakes in Mexico and a wildfire is still out of control in Northern California.

The analysts noted that the third quarter results will offer more information on how conservate the pre-announced nat cat loss ranges are, noting that within Credit Suisse’s coverage, XL Group is most at risk of upward loss revisions. For Arch Capital and Chubb the analysts expect estimated cat losses to be more likely to hold or develop favourably.

Following the third quarter Credit Suisse expects the focus to shift to items that may have an impact on 2018 earnings. These items include the impact that third quarter capital hits may have on capital management plans, the scrutiny over annual catastrophe estimates for reinsurance companies that Credit Suisse analysts think had drifted lower than they should have been.

In addition, discussions will turn around assessing winners and losers in terms of exposure to what's likely to be at least a near term rebound in catastrophe exposed property pricing, and secular health of the reinsurance business from a return standpoint.

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