U.S. primary insurer Chubb has reported that its catastrophe losses from the first-quarter of 2018 are estimated to be $380 million net of reinsurance and before tax, which includes the impacts from the California mudslides.
Chubb’s preliminary catastrophe loss estimate of $380 million is expected to drop to $305 million after tax.
The losses come from across Chubb’s business, so include impacts to its commercial and personal property and casualty insurance books as well as its reinsurance operations.
Chubb has reported pre-tax and after reinsurance losses of $125 million from the California mudslides, as well as $115 million and $80 million from two northeast U.S. winter storm events that struck on January 3rd and March 1st. Other catastrophe events around the globe added a further $60 million of pre-tax losses for the insurer.
The level of losses suffered by Chubb is well above where analysts would typically assume the insurer would report its first-quarter catastrophe losses, which of course suggests that reinsurance firms and any collateralized reinsurance partcipation from ILS funds will have taken a larger share of any losses than they might have anticipated.
In Chubb’s case, the insurer will also be passing a share of these first-quarter catastrophe losses onto the investors behind its ABR Re total-return reinsurer joint-venture, between Chubb and investment manager Blackrock.
ABR Reinsurance Ltd. has a mandate to participate as a reinsurer on risks Chubb has underwritten, including non-life insurance, non-property catastrophe reinsurance and also property catastrophe reinsurance contracts, which suggests that a portion of these losses will have been ceded to the vehicle.
ABR Re works a little like a sidecar for Chubb. Backed by third-party investors while also having a total return investment strategy, ABR Re provides a very efficient source of reinsurance for Chubb, while also giving institutional investors another way to access the returns of re/insurance business, through a structure that can also provide a total-return, with the help of Blackrock.
These days it’s always safe to assume that a major player like Chubb will be passing on some of its catastrophe losses to alternative capital investors, through ILS or other vehicles such as ABR Re.
Analysts at KBW said that the losses announced by Chubb may also read across to other insurers, including AIG, that have exposure to the same set of U.S. catastrophe events from the first-quarter of the year.