Posted on 28 Dec 2012 by Neilson
Cautioning final outcomes uncertain, insurers including AIG, Everest Re Group and PartnerRe continue to issue initial catastrophe loss estimates related to superstorm Sandy.
As the rubble settles along the U.S. Northeastern coastline devastated by superstorm Sandy, insurers continue to offer initial estimates of their losses. Sandy, a deadly 1,000-mile wide storm that took the lives of 132 people as it swept up the Northeastern seaboard in late October, is expected to cost insurers up to $25 billion in total losses. By these estimates Sandy is being classified as the second-costliest storm after hurricane Katrina in 2005.
AIG and Allstate have already estimated their Sandy losses at $1.3 billion and $1 billion respectively, while Swiss Re, the world's No. 2 reinsurer, reported that it expects to pay out $900 million. Mutual insurer State Farm, meanwhile, has not reported estimated losses; instead, the company released the total number of claims reported as 110,198 home and 17,843 auto.
Global reinsurer PartnerRe Ltd. said it will record a charge of between $200 million and $240 million in its fourth quarter 2012 results related to Sandy, clarifying it as pre- tax, net of retrocession and reinstatement premiums. The reinsurer noted that its commercial lines exposures will take the bulk of its losses.
Cautioning the uncertainty associated with any catastrophe loss estimate, PartnerRe noted that the current estimated losses are based on its company's cedants-supplied information, which is combined with other loss estimate techniques. Further uncertainty is affected by the claim settlement process, noted the company.
Another reinsurer, Everest Re Group, issued a statement estimating Sandy-related losses at approximately $220 million (net of reinstatement premiums and taxes). The company's initial loss estimates are based on a projection of losses absorbed by the reinsurance industry estimated at between $20 and 25 billion. Other issues taken into account include modeling information, underwriter analysis, discussions with clients and a summary of exposures within the affected areas. The company, which noted strong earnings and an operating profit for the quarter, also cautioned inherent uncertainties against the reality of further Sandy-related claims.
Offshore carrier Aspen Insurance Holdings Ltd. Reports its fourth quarter 2012 earnings to reflect $175 million in Sandy-related losses (after-tax and net of reinsurance and reinstatement premiums), 65 percent of which impacts its reinsurance segment and 35 percent from its insurance segment.
The Hamilton, Bermuda company said in its initial review of cat losses, it included provisional loss advice, limited loss data from clients and modeled projections.
The Navigators Group Inc. offered initial loss estimates between $18 million and $25 million (net of reinsurance and the effects of reinstatement premiums).
The carrier based its loss estimates on current information related to the sum of estimates of claims and claim expenses incurred to date, reinsurance recoveries and reinsurance reinstatement premiums. Navigators Group noted that its initial loss estimates are also based on evaluation of its potential exposures, preliminary discussions with certain insured clients and cat modeling techniques.
Validus Holdings, meanwhile, expects Sandy losses to cause a net negative impact of approximately $333.1 million. Validus, which counts specialty insurer Talbot and Validus Re among its segments, acquired Flagstone Reinsurance Holdings for $623 million in cash and stock approximately one month after Superstorm Sandy hit the Northeast coast.
Validus issued a loss projection of $39.1 million for Flagstone Reinsurance Holdings, and said it expects Validus Re segment to absorb approximately $256.2 million in losses and $79.6 million will come from its Talbot segment.
Axis Capital Holdings Ltd., Pembroke, Bermuda, reports initial estimates of Sandy-related losses at $300 million (after tax, reinsurance recoveries and reinstatement premiums). The company, which lists the losses between its reinsurance and insurance segments, said it expects to retain all losses in its reinsurance segment. The company's commercial property business and marine lines will absorb the insurance units Sandy-related losses.
Switzerland-based specialty insurer and reinsurer Allied World Assurance Co. Holdings reports approximately $165 million in fourth-quarter cat losses as a result of Superstorm Sandy. As in previous company descriptions, Allied's preliminary estimate is pretax and net of recoveries and reinstatements. With estimates based on total industry losses predicted to reach $25 billion, Allied noted that approximately $95 million of the total will come from its insurance segment.
Bermuda-based RenaissanceRe Holdings reports that its fourth-quarter results will reflect $130 million in Sandy-related losses. The reinsurers estimates derived from claims estimates, expenses, reinstatement premiums assumed and ceded, lost-profit commissions, redeemable non-controlling interest and other income.
Finally, a few of Lloyds of London syndicate members are cautiously predicting a combined loss of approximately $375 million from Sandy, noting the final tally may change. A collection of about 80 competing insurance syndicates, the Lloyds of London market has not yet said how much Sandy will cost it collectively.
Lloyd's largest syndicate operator, Bermuda-based insurer Catlin Group, is expected to experience about $200 million in claims from Sandy. Competitors Hiscox and Novae put their exposure at 90 million pounds ($145.79 million) and between $25 million and $30 million respectively, notes a Reuters report. And Lloyd's insurer Beazley expects to take a $90 million hit from Sandy, the company reported last week.