Arch feels US winter storm reinsurance hit, at up to $16bn industry loss

Arch Capital Group, the global insurance and reinsurance specialist underwriter, has pre-announced an expectation of suffering up to $190 million of first-quarter catastrophe losses, the majority of which seem to be from the US winter storms, on which the company pegs an up to $16 billion industry loss estimate.

Arch Capital said that it estimates impacts from the US winter storms and freezing weather, as well as some minor global events, for Q1, plus a de minimis amount for its ongoing exposure to the global COVID-19 pandemic in the current accident quarter.

The estimate for all of this comes out in a range of pretax catastrophe losses of $180 million to $190 million, across Arch’s property casualty insurance and reinsurance segments, which is net of reinsurance recoveries and reinstatement premiums.

Arch Capital said that its losses from US winter storms Uri and Viola are based on a range of industry insured losses of $14 billion to $16 billion, which is a little higher than some other carriers suggest.

Arch also said that it expects the losses to be split roughly 80%/20% between the its reinsurance and insurance books, respectively.

As a reminder, Arch Capital leverages third-party capital within its reinsurance business and said towards the end of last year that third-party sources of capital and its insurance-linked securities (ILS) platform are key to future growth opportunities.

The company also has a reinsurance sidecar platform, the latest issuance from Voussoir Re is detailed here.

As a result, there’s a strong chance Arch will have shared some of its losses from the first-quarter catastrophe events with its third-party capital investors.

Arch explained the “significant uncertainties” in its estimates, noting that the figure could change depending on developments.

Arch’s pre-announcement comes on the heels of similar announcements from AXIS Capital, which expects up to $90 million of losses after February’s US winter storms, and RenaissanceRe, which expects winter storm Uri will have a net negative impact of around $180 million on its first-quarter 2021 results.