Swiss Re Insurance-Linked Fund Management

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Hiscox adds $40m to Jebi & Michael reserves, sees retro opportunities


Insurance and reinsurance group Hiscox has issued a trading update to warn of a hit to first-half profit due to a $40 million strengthening of its typhoon Jebi, hurricane Michael and risk excess book reserves.

Hiscox logoAt the same time the company says that given the improved reinsurance market conditions, it is seeing attractive opportunities in retrocession for its Hiscox Re & ILS division.

It’s a sign that other major re/insurers are likely to report reserve strengthening at this quarterly results season, as the loss creep from typhoon Jebi’s impact in Japan and hurricane Michael’s impacts in Florida from 2018 flow through into results.

Hiscox said that it expects to report profit before tax in the range of $150 million to $170 million for the first-half of 2019.

However, the firm also said that this includes an estimated investment return of $150 million to the end of June, suggesting the underwriting return is break-even for the period after the impacts of the adverse development to these losses.

“The scale of deterioration has been significant, with industry loss estimates having increased materially since these events,” Hiscox said. “The combined impact of reserve strengthening for these events is approximately $40 million net.”

In addition the company said that there have not been any improvements to the reserve positions for hurricanes Harvey, Irma and Maria during the first-half of this year.

However, with market conditions having improved after the losses of recent years, Hiscox notes that its seeing opportunities in the London market and reinsurance.

“Conditions are improving with good rate momentum for most lines in Hiscox London Market. Hiscox Re & ILS is finding opportunities in the retrocession market, where reduced capacity has significantly improved rates,” the company said.

This suggests improved rates are being achieved by the Hiscox Re Insurance Linked Strategies Ltd. funds in their underwriting as well, which would bode well for investors through the months ahead.

Hiscox said that typhoon Jebi is now estimated as a $16 billion industry loss event, based on Swiss Re data, while hurricane Michael is now $12 billion.

The news sets the tone for loss creep being a major feature of the Q2 reporting season, as re/insurers now catch up on the creep already reported by many ILS funds and collateralised reinsurance vehicles which report on a monthly basis.

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