Swiss Re Insurance-Linked Fund Management

Xactanalysis Insights and PCS

Blue Capital Re takes 28.6% hit from Q3 cats, looks for higher rates


New York stock exchange listed fully collateralized reinsurer Blue Capital Reinsurance Holdings Ltd. has reported a 28.6% hit to its fully converted book value per common share after third-quarter 2017 catastrophes and hurricanes, but the manager is now hoping to position the vehicle to take advantage of higher renewal rates.

Hit with a net loss of $51.9 million ($5.93 per share) for Q3 2017 and a net loss of $43.2 million ($4.94 per share) for the first nine months of the year, Blue Capital Re felt the brunt of hurricane losses unsurprisingly due to its property catastrophe focused strategy.

The firm operates as an equity funded, listed reinsurance company, but acts more like an efficient ILS vehicle, offering shareholders a way to share in the returns, and losses of course, of global reinsurance business in a more liquid vehicle.

Book value per common share fell to $14.48 at September 30th 2017, down 28.6% for the quarter and 22.5% over the past twelve months, inclusive of dividends declared in each period.

Blue Capital Re provides collateralized reinsurance to cedents in the property catastrophe market and also invests in a range of insurance-linked securities (ILS). It’s exposure includes to retrocession, hence it’s no surprise the size of its losses from hurricanes Harvey, Irma and Maria.

Combined ratios for Q3 2017 and the year-to-date were 455.7% and 228.7%, with the current quarters loss and loss adjustment expenses reported at $68.1 million.

Blue Capital Re lessened the impact to its earnings through the use of industry loss warranty (ILW) hedges, at least one of which paid out providing the firm with a valuable $5 million of protection recovery.

Michael J. McGuire, Chairman and CEO, commented on Q3’s results, “The financial impact to the insurance industry from the third quarter catastrophe events is estimated to collectively be above $100 billion and these catastrophe events had a meaningful impact on our results.

“Due to our strong risk management practices, active portfolio management and the leveraging of our partnership with Sompo International our losses from these catastrophe events were within our risk thresholds and our overall portfolio performed as expected given the magnitude of these events.”

The company, operated by insurance and reinsurance linked investment specialists Blue Capital Management, a division of Sompo International (previously Endurance), now looks forward to making the most of any higher rates available at the January renewals, as it looks to recoup some of what it has lost.

Blue Capital Re has been gradually growing its book, underwriting of reinsurance premiums increased to $39.4 million for the year-to-date, up by $4.9 million over the same period of last year. It will now be seeking to underwrite the most profitable January renewal portfolio it can, in order to recoup some of its losses.

McGuire said, “Looking forward, we expect market pricing to improve during upcoming renewals and we have positioned the Company appropriately in recognition of the changed market conditions.”

Register today for ILS NYC 2023, our next insurance-linked securities (ILS) market conference. Held in New York City, February 10th, 2023.

Artemis London 2022 - Insurance-linked securities conference in London

Get a ticket soon to ensure you can attend. Secure your place at the event here!

Print Friendly, PDF & Email

Artemis Newsletters and Email Alerts

Receive a regular weekly email newsletter update containing all the top news stories, deals and event information

  • This field is for validation purposes and should be left unchanged.

Receive alert notifications by email for every article from Artemis as it gets published.