Blue Capital Re forecasts stable pricing as it takes Q3 loss from cats & Irma

Blue Capital Reinsurance Holdings Ltd., the stock exchange listed, collateralized reinsurer owned by Sompo International Holdings Ltd., has reported a loss for the third-quarter of 2018 but forecasts a more stable market pricing environment ahead.

Blue Capital Re fell to its Q3 loss on the impacts from current period catastrophes and ongoing hurricane Irma loss creep.

The company had previously announced that it expected an increase in estimated losses related to last year’s hurricane Irma as well as a hit from third quarter 2018 losses stemming from Typhoon Jebi and Hurricane Florence.

As a result, the company has reported net losses of $6.7 million for Q3 2018 and $3.7 million for the first nine months of the year, with a current quarter combined ratio of 212.6% and 124.7% year-to-date.

Michael J. McGuire, Chairman and CEO of the company, commented on the results, “While our 3rd quarter results have been impacted by increased loss estimates related to 2017’s Hurricane Irma and from losses incurred on Hurricane Florence and Typhoon Jebi and other smaller events, the price increases we achieved during this year’s renewals have helped to partially offset these impacts.”

Blue Capital Re underwrote $4.2 million of reinsurance premiums during Q3 and $24.1 million for the first nine months of 2018. Both figures are down on the prior year, due to the collateralized reinsurance firm having a smaller capital base following the 2017 hurricanes, as well as the impacts of lower reinstatement premiums and greater cessions to third party reinsurers, although these factors were partially offset by price improvements achieved at the January and June renewals.

While price improvements may be too much to ask for at the next January renewals, at least not broadly, Blue Capital Re does expect pricing to be relatively stable.

“As we look forward to the January renewals we expect a stabilizing pricing environment and are confident in our ability to continue building an attractive portfolio of business which should enable us to generate value for our shareholders,” McGuire explained.

Hurricane Irma’s loss creep remains a major story for the reinsurance and ILS sector, with estimates of industry losses continuing to rise and reported loss creep increasing still, as reopened claims and assignment of benefits (AoB) issues drive an increasing burden for the sector.

Collateralized reinsurance strategies, like Blue Capital Re, will be looking forward to realising their ultimate losses from that storm so they can pay the claims and move forwards without additional impacts to results in future quarters. That could take some more months before the memory of Irma can be erased.

Additionally, Blue Capital Re reported that it is too early to provide an accurate loss estimate for hurricane Michael, but the firm does expect its fourth quarter 2018 results will be negatively impacted by losses from that hurricane as well.