Advent, the Lloyd’s insurer, has updated it’s loss estimate for Hurricane Ike today. It’s original estimate of $15m has been upped to $42m due to the extent of losses being reported by loss adjusters.
The increase is primarily from Advents Lloyd’s Syndicate 780 which manages the offshore energy account, it has had an increase in losses of £22m purely from that line of business. This has made their energy account pretty unprofitable.
As a result, Advent have announced that they are ceasing to write any Gulf of Mexico offshore energy business which has windstorm exposure.
So, the Gulf of Mexico offshore energy industry could be facing a lack of capacity next year, it’s expected that other insurers may follow Advents lead and withdraw. This creates a great opportunity for the catastrophe futures markets to step in and provide that capacity through futures and options. At times like this the alternative risk transfer and capital markets should step forwards and demonstrate the value they can add by providing capacity which is otherwise hard to come by.