Aspen takes $135m California wildfire loss, $245m underwriting loss in Q4

Insurance and reinsurance group Aspen Insurance Holdings Limited has reported a $245 million underwriting loss for the fourth-quarter of 2017, the majority of which is made up of a $135 million hit, after reinsurance, from the California wildfires, while the rest is due to mid-sized and attritional losses.

The $135 million California wildfire loss that Aspen expects to suffer is largely attributed to the firm’s reinsurance business and the loss is net of net of retrocessional reinsurance and reinstatement premiums.

The expected $245 million underwriting loss for Q4 2017 is due to the wildfires plus an increased frequency of mid-sized and attritional losses which are largely from the insurance side of Aspen’s business.

There’s a good chance that some third-party capital providers and investors may have taken a portion of these losses, given Aspen’s use of private quota shares, its Silverton sidecar and other private collateralized reinsurance arrangements.

Aspen said that the insurance losses come from a range of business lines, including due to the impacts of property and fire-related losses in the UK and U.S., as well as to a lesser extent, cyber losses and a rise in a previously reported surety loss.

Aspen also said that the fourth-quarter underwriting loss includes a reserve release from prior years, which suggests that it could have been worse without that. Aspen said that its other reserves for losses and loss adjustment expenses remain strong.

Chris O’Kane, Chief Executive Officer, commented on the Q4 performance, saying, “We are deeply disappointed with our financial performance in 2017.”

O’Kane said that the company has taken actions to try to improve its underwriting results, adding that, “We expect to see the impact of these reflected in our 2018 underwriting year results and beyond.”

Further, O’Kane explained, “We believe our capital position is appropriate to support our ongoing business and underpins our financial strength ratings.”

The size of the California wildfire losses is not a surprise, given Aspen’s reach within reinsurance markets. The attritional and mid-sized losses are perhaps a little higher than some might have anticipated, but again, given the company’s breadth of underwriting not that surprising.

Aspen had previously estimated its third-quarter 2017 catastrophe losses at $360 million, from events including hurricanes Harvey, Irma and Maria.

Given 75% of Aspen’s Q3 catastrophe losses were from its reinsurance segment and now at least 55% of its Q4 losses are from its reinsurance business segment, it suggests that the Aspen Capital Markets third-party capital vehicles are likely to take a share, including its $130 million collateralized reinsurance sidecar Silverton Re and its more recently launched special purpose reinsurer Peregrine Re, as well as other private quota shares or collateralized arrangements.