Validus reveals $412.7m net loss, with $35.8m from its AlphaCat stake

Bermuda headquartered reinsurance firm Validus Holdings, Ltd. has issued an estimate of its losses from recent hurricanes Harvey, Irma and Maria, and the Mexico City earthquake, putting the net loss at $412.7 million, with $35.8 million of the total coming from its stake in AlphaCat.

Validus maintains a stake in all of the vehicles operated by insurance-linked securities (ILS) and third-party reinsurance capital arm AlphaCat Managers Ltd., aligning itself with third-party investors.

The AlphaCat vehicles were always going to be exposed to recent events and the multiple ILS strategies the unit operates are likely to have been exposed to the hurricanes and some to the earthquake as well.

Validus’ stake in AlphaCat’s vehicles, the related party assets reported at the mid-year 2017, amounted to $195 million, which is only 6% of the ILS managers total $3.1 billion of assets under management.

The $35.8 million AlphaCat-inherited loss does suggest around an 18% hit to Validus’ stake in AlphaCat, across the range of ILS operations, although this is likely too simplistic a method for calculating the true impacts AlphaCat has felt from the catastrophe events of Q3.

Validus said that less the net impact on premiums earned its losses are reduced to $378.9 million, with the AlphaCat portion dropping very slightly to $35.7 million.

The reinsurer estimates that its net loss from hurricane Harvey will be $146.4 million, from hurricane Irma $163.2 million, hurricane Maria $57.7 million and the Mexico City earthquake $11.6 million.

Validus also provided estimates of industry losses for each event, which it had derived as part of its loss evaluation process, putting hurricane Harvey at $20 – $30 billion, hurricane Irma $25 – $40 billion, hurricane Maria $25 – $45 billion and the Mexico City earthquake $2 – $4 billion, all excluding the NFIP.

Ed Noonan, Validus’ Chairman and Chief Executive Officer, commented; “The devastation caused by these disasters has inflicted significant suffering and loss to tens of millions of people, and our first thoughts are for those whose lives have been disrupted. A key part of what we do is to help people recover from the financial impact of catastrophes. We will pay significant amounts in this regard, and it is a moment in which I am proud of the role that our company and our industry performs for communities all over the world.

“Validus is a strong company, and we are very prudent in our risk management. As we look to the rest of the year we continue to be well positioned with significant retrocessional and reinsurance protection in place. While these events will affect each of our businesses, our financial position allows us to sustain these events with no disruption.”