Chubb expects $453m Q4 catastrophe & crop losses after reinsurance

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U.S. and global primary insurance carrier and reinsurance company Chubb has announced an expected fourth-quarter pre-tax and net of reinsurance hit of $430 million from catastrophe losses and an additional $23 million of losses from U.S. agricultural lines which were hit be weather-related poor growing conditions.

Evan Greenberg, ChubbDemonstrating that the fourth-quarter of 2019 was a relatively expensive one for the global insurance and reinsurance market, Chubb said that its Q4 catastrophe losses primarily came from a range of severe weather-related events around the globe including tornadoes in Texas, wildfires in California and typhoon Hagibis in Japan, as well as some losses suffered due to the civil unrest seen on opposite sides of the world in Hong Kong and Chile.

The cost to Chubb of all of these catastrophe events in the last three months of 2019 is expected to be $430 million before tax, or $353 million after tax, net of reinsurance and including any reinstatement premiums.

Chubb’s catastrophe losses come from its commercial and personal property and casualty insurance businesses, as well as its reinsurance underwriting operations around the globe.

In addition, Chubb has also experienced losses from inclement weather that has affected the growing season in the United States, where crop insurance losses have been on a steady rise partially following the significant flooding in the middle of the country earlier in the year.

The U.S. agricultural insurance business at Chubb will actually fall to an underwriting loss, net of reinsurance, of $23 million pre-tax, or $18 million after tax for the fourth-quarter.

The insurer said that this is largely related to crop yield shortfalls resulting from poor growing conditions.

Because of this, Chubb expects that its combined ratios for the North American crop insurance business for the fourth quarter and full-year 2019 will be 105.4% and 95.1%.

Weather related crop losses due to poor growing conditions have been coming through 2019 and were expected to drive some insurers into unprofitable underwriting territory.

Chubb had also taken a charge in Q3 2019 because of preventive planting claims from the impact of wet weather conditions.

The catastrophe losses are not as bad as last year, when Chubb was hit by the California wildfires and its Q4 2018 cat losses rose to $585 million pre-tax.

As is typical with Chubb’s business model, it’s expected that a share of all these losses could fall to the third-party investors backing its joint-venture total-return reinsurance company, ABR Reinsurance Ltd. (ABR Re).

Global reinsurers and perhaps also some ILS funds may find themselves exposed to supporting Chubb, where the carrier has utilised reinsurance support to assist in paying claims for these Q4 weather and catastrophe events.

As usual, we should expect these losses to read across to other large and global players, so it’s possible we will see more catastrophe loss pre-announcements before the reporting season begins for Q4 and full-year 2019.

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