Cincinnati Financial & Selective add to Q2 above estimate cat loss reveals

The impacts of elevated severe and convective weather occurrences in the U.S. continue to be apparent in the latest pre-announcements of second-quarter 2020 losses, as insurers Cincinnati Financial and Selective Insurance Group added to the industry toll last night.

The insurers have both reported severe weather and catastrophe losses above where analysts had been expecting, joining a raft of others including Heritage, The Hanover, Arch Capital, Travelers, W. R. Berkley, Universal, Chubb and United.

Cincinnati Financial Corporation said that it expects to report pretax catastrophe losses of roughly $231 million for the second-quarter of 2020, which it estimates will add 16.5% to its combined ratio for the period, based on estimated property casualty earned premiums.

Cincinnati said that two multi-state storm systems in early April have each contributed around $50 million in losses, on top of catastrophe losses from several less severe storms in Q2.

In addition, rioting and civil unrest drove a further $29 million of Q2 losses for the firm.

The losses are split, $122 million for the commercial lines insurance segment, $91 million for personal lines insurance segment, $3 million for excess and surplus lines and $15 million for its Cincinnati Global subsidiary.

Steven J. Johnston, chairman, president and CEO, said, “Cincinnati Insurance was built to withstand challenging quarters thanks to our strong balance sheet and resilient business model. Our field claims associates rose to the occasion this spring, serving policyholders with empathy in the midst of the global pandemic. They continued to thoroughly and quickly review claims to determine the appropriate payment based on the policy contract. Our solid financial position ensures our ability to help the families and businesses in our agents’ communities on the road to recovery after a covered loss.”

On top of the severe weather and catastrophe loss burden, Cincinnati also expects second-quarter 2020 pandemic-related incurred losses and expenses to total approximately $65 million, adding another 4.6% to the quarterly combined ratio.

$15 million of this falls to the companies Cincinnati Re reinsurance unit, around half of which is from reinsurance treaties with insurers that provided affirmative coverage for pandemic-related business interruption, the company said.

The upshot for Cincinnati is an expected second-quarter 2020 property casualty combined ratio of around 102% to 104%.

Selective Insurance Group meanwhile pre-announced pre-tax net catastrophe losses totaling approximately $83 million for the second-quarter of 2020.

The losses are across “numerous catastrophe events designated by Property Claims Services during the quarter, including two April storms ($43 million) and claims related to civil unrest ($18 million).”

Thanks to the higher than expected catastrophe losses, Selective expects its second quarter combined ratio will be around 98% to 99%.

“We experienced a record level of catastrophe losses for the second quarter, driven by industry-wide U.S. catastrophe loss activity that significantly exceeded the 10-year historical median,” explained President and Chief Executive Officer John J. Marchioni. “Our claims team is working closely with our distribution partners to process these claims and help our policyholders restore their property. Despite the higher level of catastrophe losses, our underlying performance was strong, as our combined ratio indicates. In addition, our combined ratio guidance continues to reflect our estimates of the full-year impact of COVID-19.”

Analysts warned previously that severe weather losses may have run above plan for many U.S. carriers in Q2 2020 and this seems evident in the pre-announcements we’re now seeing.