Irma dents Blue Capital Re Q1, but rate increases bode well for year


An increase in estimated losses from last year’s hurricane Irma has dented the first-quarter results of Blue Capital Reinsurance Holdings Ltd., but the manager of the vehicle is confident in the portfolio underwritten at renewals this year and expects higher rates to deliver stronger returns.

New York stock exchange listed fully collateralized reinsurer Blue Capital Reinsurance Holdings Ltd., a subsidiary of Sompo International Holdings Ltd., was among the insurance-linked funds and vehicles that were hit hard by last year’s hurricane activity and wildfires.

The impacts of the 2017 catastrophe events continues to be felt in the ILS world, with Blue Capital Re reporting its first-quarter was dented by loss creep from hurricane Irma’s impacts on Florida.

The company, which underwrites collateralized property catastrophe reinsurance and also invests in certain insurance-linked securities (ILS), reported positive net income of $0.5 million ($0.06 per share) for the quarter ended March 31st 2018, down on the $4.1 million earned in the prior year quarter.

The impact of hurricane Irma related prior year losses and also the effect of having less collateral to deploy, due to a portion being trapped to deal with the impacts of the 2017 catastrophes, is the cause of the decline in income this quarter.

As we wrote previously, numerous ILS funds and collateralized vehicles have been hardening hurricane loss reserves so far this year, resulting in lower than expected returns for many.

Blue Capital Re underwrote a little less in premiums at the renewals this year, as a result of the impacts of the 2017 catastrophes, but also purchase more reinsurance to protect its book and secured an average risk adjusted price increase of 12% during the January negotiations as it capitalised on market firming.

Michael J. McGuire, Chairman and CEO of Blue Capital Re, commented on the results, “The first quarter results were adversely impacted by an increase in reported losses related to Hurricane Irma as claim settlements and related loss adjustment expenses were greater than originally expected. Pricing continues to show positive momentum, and as we previously reported, we achieved improved pricing during January renewals.  The market improvements coupled with our strategic alignment with Sompo International Holdings Ltd., has enabled us to construct an improved portfolio year over year with higher return expectations and a lower risk profile.”

The collateralized reinsurance firm, like the rest of the ILS market, will be hoping for a quieter hurricane season in 2018 to allow the portfolios created to generate their maximum return potential throughout the remainder of this year.

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