Loss creep from hurricane Irma has remained evident for the major insurers operating in Florida in the third-quarter of the year, but the impact to reinsurance markets is slowing and the Florida Hurricane Catastrophe Fund (FHCF) has been soaking up much of the new claims inflation, at least from larger players.
Ever since hurricane Irma struck Florida back in 2017, impacting most of the state, insurers have been steadily working there way through the pile of claims and increasing their ultimates as they go.
Not helped by the plague of assignment of benefits (AOB) claims that came with such a large and damaging storm, the major insurance carriers have been working hard to draw a line under hurricane Irma, as too have the reinsurance and insurance-linked securities (ILS) sectors.
Overall, hurricane Irma claims figures had been escalating steadily over the last two years, while numerous claims were also re-opened, causing issues related to claims inflation from high loss adjuster costs, to the added AOB litigation crises related issues, all of which has been driving the steady loss creep.
But still the Irma loss creep continues, with just two major insurers reporting over $400 million of additional loss creep to their Irma totals in the third-quarter of 2019.
Universal Insurance Holdings is one example of a major insurer that has struggled to stem the loss creep tide, having reported its gross Irma loss at a raised $1.055 billion at the end of June, citing 92,000 claims in total of which roughly 5,500 remained open at the end of the first-half of 2019.
Progress is being made, as Universal’s President and Chief Risk Officer (CRO) Jon Springer said in recent days that the open claims figure was now down to less than 2,000.
But at the same time the insurer has added to its gross hurricane Irma loss by an additional $195 million, taking it to $1.25 billion at the end of Q3.
By the time of the Universal earnings call in recent days, the company had reduced the outstanding claims figure even further, to less than 1,000, Springer said. Which suggests that Universal is now getting through these cases faster and faster, pointing at an approaching end to the loss creep from Irma.
For the reinsurance and ILS capacity providers that have supported Universal through its claims from hurricane Irma, Springer’s comments during the insurers recent earnings call suggest that they are no longer taking any significant additional impact (if any) from the recent loss creep and any future that occurs.
“At this point in the life cycle of Hurricane Irma, the vast majority of any increase in loss is covered by the Florida Hurricane Catastrophe Fund,” Springer explained.
Q3 loss creep from hurricane Irma was not confined to Universal, as fellow Florida headquartered insurer United Insurance Holdings Corporation (UPC Insurance) also increased its gross Irma impact during the quarter.
United (UPC) CEO John Forney explained that the Florida domiciled P&C insurer had increased its gross Irma loss by roughly 20%, or approximately $240 million, during Q3, to take it to $1.2 billion.
At the same time, Heritage Insurance Holdings, Inc. reported favourable prior year reserve development of $0.4 million for the third-quarter, suggesting that its prior year hurricane loss positions are in a much better state than some of its competitors.
Although it’s important to note that this positive prior year development on its reserves was actually lower than Heritage had recorded the year before, perhaps suggesting more prior year event impact in 2019.
Our sister publication Reinsurance News’ directory of major insurance and reinsurance market loss events shows that hurricane Irma is considered to have driven an industry loss of as much as $32 billion, with an overall economic loss of $67 billion.
It’s no surprise an event of this magnitude and complexity has resulted in loss creep and it’s clear that the loss creep from hurricane Irma has been a particularly significant factor in the market over the last two years and is ongoing.
While loss creep continues, much less of the impact will be falling to private reinsurance carriers now (aside perhaps from some quota share coverage), with the FHCF taking the brunt of any development burden from here on it seems.