Europe’s big four facing $1.5bn-$2.7bn property losses from Hurricane Ian: Berenberg

Europe’s big four reinsurers will incur property cat reinsurance losses of between $1.5bn and $2.7bn based on Hurricane Ian being a $25bn to $35bn insured loss event, according to preliminary estimates by Berenberg.

The analysts estimated Munich Re’s exposure to the ferocious storm at between $750mn and $1.25bn, which represents around 37 percent of its outstanding cat budget.

Swiss Re would likely incur gross losses of $500mn for a $25bn event, rising to $1bn should losses reach $35bn.

The estimates are based on AM Best data showing Munich Re as holding a 6.4 percent share of the Florida property reinsurance market. With Swiss Re holding a 5.1 percent market share (see table below).

Hannover Re and Scor have smaller shares of the market, equating to projected gross losses of $150mn-$250mn for the former and $100mn-$200mn for the latter.

At the 1.1 renewals, the four reinsurers also adopted different strategies for their cat and retro-buying appetites. Hannover Re, in particular, reduced its retro program by €340mn while also growing its inwards cat-exposed book by 25 percent. In contrast, Scor exited from US primary wind-exposed MGAs last year and has displayed a cautious approach to cat reinsurance.

The data shows the state-backed Florida Hurricane Catastrophe Fund (FHCF) as holding the largest market share at around 10 percent, with Berkshire Hathaway holding an 8.3 percent share.

Among London-listed carriers, Berenberg has estimated Beazley’s gross exposure at $70mn for a $25bn event and $90mn for a $35bn industry loss.

Hiscox is expected to incur gross losses of $65mn to $85mn, with Lancashire forecast to take a $60mn to $70mn share and Conduit Re a $25mn to $30mn impact, based on the $25bn to $35bn industry loss range.

Berenberg analyst Kathryn Fear said that most possible loss scenarios from the event suggest Ian will remain an earnings rather than a balance sheet event.

Fear said individual market share data for companies may overstate likely loss impacts, given that many may have reduced participation at the recent Florida renewals.

Selective risk appetites may also limit exposures – Munich Re, for example, will typically attach at the top end of cat towers and avoid lower layers, especially those attaching below the FHCF.

Given recent turmoil in the Florida market, Fear said historical hurricane losses in the state were unlikely to be representative of market shares today.

“Any large losses in Florida will further add to the pricing rhetoric around rising rates and provide fodder for discussions at the Baden-Baden Reinsurance Meeting; this

will take place at the end of October and is where most deals will be struck,” Fear said.

“However, the demand surge from a large loss could also lead to a deterioration in current inflationary trends meaning shorter-term share prices will likely be under pressure while the market assesses the costs.

“We expect a recovery in the share prices as we gain more clarity on the earnings and

balance sheet impacts as well as pricing, as investors look into 2023,” she added.

Separately, today KBW’s Meyer Shields said the most recent projected path for Ian suggested a lower “but still very significant” insurance and reinsurance loss than implied by previous projections.

“Although it’s too early for us to credibly estimate individual companies’ losses, we expect Ian to add momentum to 2023 property catastrophe reinsurance rate increases – keeping us broadly positive on the Bermudian (re)insurers – and to further disrupt Florida’s already-challenged property insurance marketplace,” he said.

Yesterday, Hurricane Ian’s projected path shifted southwards and away from Tampa where the potential for a greater loss was higher and towards the less populous Fort Myers region. Nonetheless, the National Hurricane Center said the storm was “rapidly intensifying” with maximum sustained wind speeds of almost 155 mph, making it a high Category 4 intensity hurricane.

Modelling firms yesterday provided indicative loss estimates in the region of $32.5bn (KCC) to $40bn (RMS).