Munich Re expects €1.8bn losses from hurricane Ida & European floods

Global reinsurance giant Munich Re has said that it expects to report around €1.8 billion of catastrophe losses from third-quarter events hurricane Ida and the European flooding caused by windstorm Bernd.

These loss picks are perhaps a little higher than some analysts had been expecting for the Q3 events, but this is likely only a reflection of Munich Re’s continued growth in a firmer market where the reinsurance company tends to retain some more of the risk.

A comparison might be back in 2017, when Munich Re pre-announced an expectation of up to €1 billion of losses related to hurricanes Harvey and Irma, which shows that the company has likely increased its US cat exposure over the last few years.

Munich Re breaks down its losses as, a roughly €600 million hit from windstorm Bernd and its flooding in Germany and neighbouring countries, which has hit both its property-casualty reinsurance and ERGO Property-casualty insurance Germany segments.

While hurricane Ida has caused losses of roughly €1.2 billion, that all fall to Munich Re’s property-casualty reinsurance segment.

We assume these are net estimates, so after any retrocessional reinsurance or quota share benefits, including from Munich Re’s sidecar vehicles, although the company does not specify gross or net.

The reinsurer reiterated today that it expects to still hit its full-year profit target of €2.8 billion, even after these significant losses.

It expects its third-quarter result will still be around €400 million, which is a little below analyst consensus now, but also factors in rising mortality related losses from the pandemic and how COVID-19 has affected its life and health reinsurance book.

Other Q3 catastrophe loss pre-announcements include: Swiss Re at $1.27 billion net; RenaissanceRe at $725 million net;  Arch Capital at up to $345 million net; Everest Re at $635 million net; and AXIS Capital at $250 million net.

Yesterday, Munich Re said that “prolonged” market hardening is expected in reinsurance, with rate rises forecast for the January 2022 renewals and European contracts seen as particularly important.