Nat cat losses to become capital event for reinsurers: S&P

Losses from natural catastrophes in the third quarter will likely wipe out global reinsurers' annual earnings and ultimately become a capital event for the sector, S&P Global Ratings said on Oct. 13.

Hurricanes Harvey, Irma, and Maria occurred in the middle of an Atlantic hurricane season with expected above-average activity in a year of unusually frequent and severe natural catastrophes, the ratings agency said.

Maria aside, Harvey and Irma could cost the insurance and reinsurance industries (for direct US exposures excluding the National Flood Insurance Program NFIP) $60 billion, adding to the $15 billion of catastrophe losses in the first half of the year. This puts the toll as high as $75 billion of insured losses, with the Atlantic hurricane season only halfway done. In other words, including Maria and emerging catastrophe events, 2017 could be a worse catastrophe year than 2005, when there was $77 billion in insured losses (based on 2016 dollars) related to Hurricanes Katrina, Wilma, and Rita.

Reinsurers are also nervously watching the remainder of the Atlantic hurricane season and the California wildfires. As a result, with likely more than $100 billion in insured catastrophe losses in the third quarter alone, the two seminal questions for reinsurers is now if the pricing reached an inflection point and how traditional reinsurers and alternative capital providers will react to these capital events, S&P noted.

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