AXIS warns on $169m catastrophe & weather Q4 hit, plus Irma creep

AXIS Capital Holdings Limited, the Bermuda headquartered specialist global insurance and reinsurance firm, has pre-announced a range of hits to its fourth-quarter 2019 earnings, from catastrophes and severe weather during the period, as well as continued loss creep from hurricane Irma.

Included in this is losses from Japanese typhoon Hagibis, the largest single event of the quarter and which AXIS Capital had already forecast would hit the firm for between $90 million and $110 million.

AXIS has revealed an expectation of a $169 million hit to Q4 2019 earnings from a range of events, although it still expects to be able to report a modest operating income for the quarter.

Within this is a pre-tax loss of $140 million from current period catastrophes and severe weather-related events, net of estimated reinsurance recoveries and reinstatement premiums.

Typhoon Hagibis is estimated to contribute $93 million of this total, primarily falling within AXIS’ reinsurance segment, and consistent with the previously disclosed range.

Other severe weather-related losses include impacts from the Australian wildfires and some regional weather events that affected the United States during the last quarter of 2019

On top of this, AXIS has also reported a pre-tax underwriting loss to its agriculture reinsurance business of roughly $29 million, which is primarily related to poor weather conditions that hits its United States and India books of agriculture business.

AXIS said that its Q4 2019 results will also feature net favorable prior year reserve development of $14 million, from business lines including motor, credit, surety and political risk.

However, this will be partially offset by further adverse loss development and loss creep related to 2017’s hurricane Irma, which the company says is “consistent with industry trends.”

The continued loss creep from hurricane Irma more than two years after the hurricane struck is concerning for the reinsurance and insurance-linked securities (ILS) fund market. But this is now finally beginning to settle down and the market will be hoping that Irma loss creep does not continue in 2020.

AXIS Capital has a significant amount of third-party capital under management and in a range of risk transfer structures, including private quota shares with large insurance-linked securities (ILS) investors, as well as its Alturas reinsurance sidecar arrangements.

Some of these will likely find themselves to a share of AXIS’ fourth-quarter 2019 losses and as a result the capital markets will help the firm in bearing the burden of the loss impact.