Global insurance and reinsurance group Everest Re has ceded both increased premiums and losses to its Mt. Logan Re Ltd. collateralized reinsurance sidecar-like vehicle in the third-quarter of 2019.
The Everest Re 10Q details the level of underwriting premiums ceded to Mt. Logan Re, a figure that has been steadily on the rise over recent years as the third-party reinsurance capital vehicle becomes increasingly core to the firms operations.
For the third-quarter, ceded written premiums passed on to Mt. Logan Re reached almost $97.4 million, up from $73 million in the prior year. Ceded earned premiums reached almost $79.6 million, up from almost $66 million.
For the first nine-months of the year, ceded written premiums neared $237.9 million, will ceded earned premiums passed $220 million, both figures being up on the prior year’s $203.5 million and $192.8 million respectively.
But at the same time Everest Re passed on increased losses this last quarter, potentially as a result of events including hurricane Dorian, typhoon Faxai and likely some further loss creep adjustments on prior year events.
Everest Re passed on ceded losses and loss adjustment expenses of $79.5 million during Q3 2019, up significantly from the almost $29 million ceded in the prior year.
However, for the year-to-date, losses ceded by Everest Re to its collateralised reinsurance vehicle Mt. Logan Re remain under the prior year, with almost $165 million ceded in the first-nine months of 2019, compared to almost $190 million for the same period of 2018.
The decline over the first-nine months reflects the continued recovery from major catastrophe loss events that occurred in 2017 and 2018, as Everest Re has not needed to pass on as many losses through its retrocessional reinsurance agreements with the third-party capitalised Mt. Logan Re during 2019 so far.
The spike in the third-quarter is could be down to fresh catastrophe activity, but also likely some loss creep as well, given estimates for losses from typhoon Jebi had risen during the third-quarter period.
Interestingly, Everest Re did not assume any losses or LAE back from Mt. Logan Re during the last quarter, despite the reinsurers own investment stake in the vehicle. Which may be due to accounting timing, as this could come in later quarters, or it could suggest that any less fresh loss activity has not hit the Mt. Logan Re book particularly hard, with the losses ceded in Q3 more down to any creep related adjustments.
It’s important to note that timing of these cessions of losses may not always be perfectly aligned with the quarters they are reported in, as losses take time to realise.