Increased use of retro to limit reinsurers’ Irma exposure: A.M. Best

by Artemis on September 9, 2017

International ratings agency, A.M. Best, has highlighted the increased use of retrocessional reinsurance protection amongst global reinsurers, including from the capital markets, which could limit some exposure to hurricane Irma as it maintains its track towards Florida, U.S.

Hurricane Irma forecast trackIn an industry note on the potential impact of major hurricane Harvey, which is expected to hit Florida and possibly the Miami-Dade area early Sunday morning, A.M. Best notes that some players that operate in the region have been utilising retrocession and also disciplined underwriting to reduce exposures.

According to A.M. Best, reinsurance companies that specialise in the property catastrophe reinsurance sector, or that are more focused on the U.S. and have kept their appetite for Florida and Caribbean property cat risks, will likely be more “disproportionately impacted by these losses.”

“However, over the past few years, all reinsurers have started pulling back capacity or are increasingly using retrocessional protection—much of it from capital market vehicles—to reduce exposure, given that pricing conditions in the property catastrophe market have deteriorated,” explains A.M. Best.

If more losses are passed to retrocession, the ILS and capital markets will take a significant share given the proliferation of sidecars and retro specialists backed by third-party investors.

Only time will tell what impact hurricane Irma has on the insurance and reinsurance market, and also the interests of capital markets investors in the insurance-linked securities (ILS) space, that participate in the Florida market via retrocession, collateralised reinsurance and catastrophe bond transactions.

Also read:

Cat bonds drop 16% on hurricane Irma, prices discounted heavily.

Hurricane Irma track in westward shift, remains on course for Florida.

Stone Ridge reinsurance and ILS fund drops 8%+ on Irma threat.

Interest in back-up reinsurance rises on Irma, live cat still quiet (so far).

Billions of catastrophe bonds at risk from Hurricane Irma.

CCRIF to pay $15.6m on Hurricane Irma impact to Leeward Islands.

Hurricane Irma track aims at Miami, a $131bn realistic disaster scenario.

Blue Capital halts ILS fund buy-backs as hurricane Irma approaches.

Cat bond trading slight on Irma, Kilimanjaro II Re trades down.

Hurricane Harvey re/insurance industry loss over $10bn: AIR.

Irma & Harvey losses combined may still just be an earnings event: Morgan Stanley.

Citrus Re 2017 cat bond notes trade down 50% on hurricane Irma threat.

Hurricane Irma live cat activity focused on $40bn+ loss, pricing uncertain.

Hurricane Irma landfall in Florida would hit reinsurers hard: KBW.

Hurricane Irma a potential U.S. (Florida) threat this weekend.

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