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KBW estimates ~9% hurricane Ian hit for RenRe, as % of common equity


Analysts at KBW have tried to put some figures on the potential hurricane Ian loss impact for some of the main insurance and reinsurance names they cover, with RenaissanceRe currently seen by the firm as the company likely to take the biggest hit, as a percentage of its common equity.

kbw-logoKBW are now working off an assumption of a $50 billion insurance and reinsurance industry loss from hurricane Ian, which is around the middle of Verisk’s estimate range it published today.

KBW said that now it has some more official industry loss estimates to work from, its analyst team is “nervously” issuing some “very” preliminary estimates of individual re/insurer net losses from hurricane Ian.

These estimates are “based on 2021 direct market shares of catastrophe-exposed lines, disclosed reinsurance coverage, regional probable maximum losses, and significant judgment,” KBW’s analyst team explained.

Adding, “We still expect Ian to represent a very expensive earnings — rather than capital — event for the companies we cover, sustaining very significant property-catastrophe reinsurance rate increases in 2023.”

KBW has assumed $5 billion of personal and commercial auto physical damage losses, $5 billion of inland and ocean marine losses, and $40 billion of losses for all other catastrophe-exposed lines of business, percentages it expects will change as more clarity emerges.

The analysts also qualified their estimates by cautioning, “We’ve used our best — always imperfect — judgment in the absence of precise disclosures, for matters like probable maximum losses, reinsurance participations, relevant aggregate reinsurance coverage/exposure, individual company reserving conservatism, changing books of business, and so on. We have almost certainly gotten some things wrong, and we expect (potentially significant) updates as more information becomes available.”

It’s notoriously challenging to predict catastrophe loss impacts for specific insurance or reinsurance companies, but KBW’s early attempt is helpful as it does include a few names of note.

First, RenaissanceRe, the Bermuda-headquartered reinsurance underwriter and of course prolific manager of third-party investor and insurance-linked securities (ILS) capital.

KBW estimates that RenRe could face a roughly 9% loss to common equity from hurricane Ian, which it pegs at around $500 million.

Given KBW’s analysts have considered reinsurance in this, this loss seems likely to be RenRe’s alone, suggesting its third-party capital partners will face additional out of the gross losses the group suffers.

In the past, third-party capital has taken a relatively significant percentage of catastrophe losses for RenRe, with its range of joint-venture vehicles and ILS funds all sharing in the loss.

We’d expect that to be the case with hurricane Ian of course, especially given RenRe’s catastrophe underwriting specialism, but to what degree it is still too early to tell.

It’s worth noting that RenRe’s share price is currently down roughly 11% since before hurricane Ian’s forecasts begin to suggest a possible US landfall event.

Berkshire Hathaway is expected by KBW to face the biggest overall net loss at around $1.397 billion, but for the giant conglomerate that would still only be a 0.2% hit to common equity.

Next is Chubb, who KBW’s analysts estimate could face just over $1 billion of hurricane Ian net losses, which would translate to 1.6% of common equity.

KBW’s analysts then estimate Arch Capital Group could face a $732 million net loss, which would be 5.2% of common equity. This seems high for Arch, but the company had been writing more catastrophe risk in recent quarters, we understand.

Progressive is then estimated to face a $625 million net loss from hurricane Ian, 3.1% of common equity, while Allstate is pegged at $578 million, 2.5% of common equity.

Other names of note in the list include Everest Re, who KBW’s analysts estimate could face a $563 million net loss, which equates to 5.6% of common equity, by the analysts reckoning. Of course, Everest Re is expected to share some of its hurricane Ian losses with its Mt. Logan Re third-party capital vehicle.

AIG is pegged at a $400 million net loss from hurricane Ian (just 0.7% of common equity), Travelers at $286 million (1% of common equity), and AXIS Capital at $184 million still 3.7% of common equity even after its pulling back from property reinsurance.

It’s really helpful analysis from KBW, as it begins to put some initial context around the loss and how it could affect some major re/insurers.

There’s an expectation that all of these companies mentioned will tap into reinsurance programs and third-party capital partnership arrangements, to help them pay their losses from hurricane Ian and to moderate the hit to their balance-sheets.

Also read:

KatRisk pegs hurricane Ian insured losses at $46bn, +/- $16.1bn.

Verisk estimates hurricane Ian loss up to $57bn, warns could breach $60bn.

Swiss Re cat bond index plummets on Hurricane Ian. US Wind down 32%.

Well over $1bn of cat bond mark-downs expected after hurricane Ian.

Hurricane Ian industry loss estimated close to $63bn by KCC.

Plenum says estimated $50bn hurricane Ian to dent its cat bond funds.

Hurricane Ian industry loss estimated up to $40bn by Fitch.

Hurricane Ian to force a reevaluation: Millette, Hudson Structured.

Hurricane Ian to cause Florida indemnity & FloodSmart cat bond losses: Twelve.

Hurricane Ian Florida insured wind & surge losses $28bn – $47bn: CoreLogic.

Hurricane Ian economic loss in Florida around $65bn: RMSI.

Hurricane Ian: A historic hit for Florida, no matter the quantum of loss.

Hurricane Ian to impact cat bond funds. Plenum says hit to be “limited”.

Hurricane Ian to add reinsurance rate momentum, disrupt Florida market: KBW.

A particularly broad cat bond mark-down this Friday?

Cat modeller data hinted at hurricane Ian’s $50bn+ industry loss potential.

Hurricane Ian: Rapid weakening may see losses nearer $32.5b, says KBW.

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