Typhoon losses set to boost reinsurance rates for Japan re/insurers - KBW

KBW analysts expect losses from recent typhoons to sustain and possibly accelerate, reinsurance rates rises among Japan's exposed (re)insurers.

KBW note that risk modelling firm AIR Worldwide has estimated insured losses for Typhoon Hagibis, which struck Japan this month, to be in the $8-16 billion range.

KBW said that Hagibis, Faxai and ongoing Jebi loss creep would produce material losses for Japanese exposed (re)insurers. It said the losses should sustain, or perhaps even accelerate, reinsurance rates increases during Japan's upcoming April 1 reinsurance renewal season, and, to a lesser extent) for the January 1 renewals focused largely on European and national U.S. accounts, given the potential pressure from these increased losses on retro capacity.

It added: “Two major typhoons within a month of each other will likely create demand surge and LAE cost inflation (specifically excluded in AIR's loss estimates) that could further increase ultimate losses.”

Notwithstanding likely significant (almost certainly earnings-event rather than capital-event) insured losses, KBW analysts expect sustained reinsurance rate increases to continue to bolster the Bermudians, and KBW analysts maintain their ‘outperform’ ratings on Arch Capital Group, Axis Capital Holdings, RenaissanceRe Holdings Third Point Reinsurance and Watford Holdings.

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