No reinsurance recoveries for Brit, but aggregate deductible almost eroded

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Brit Ltd., the specialty insurance and reinsurance player with a third-party capital management operation under its Sussex Capital entity, is now close to seeing its aggregate reinsurance protection triggered after the major third-quarter catastrophes.

brit-logoHowever, Brit did not record any catastrophe reinsurance recoveries in the third-quarter, even after the impacts of hurricane Ida, according to executives from parent company Fairfax.

Fairfax, which has ownership stakes in insurance and reinsurance companies including Brit and Odyssey Group (Odyssey Re), reported $605 million of catastrophe losses during Q3 2021, largely from Hurricane Ida and the European floods.

Hurricane Ida drove $340.1 million of catastrophe losses and the European floods another almost $174 million.

Brit experienced a Q3 combined ratio of 118%, while Odyssey’s was 109.5% and Fairfax overall 101.1%.

Year-to-date, Fairfax has absorbed roughly $1 billion of catastrophe and COVID-19 pandemic losses, COO Peter Clarke explained during its earnings call earlier this week.

During Q3, hurricane Ida added some 33 points to Brit’s combined ratio, Clarke explained, with the open market property book particularly impacted.

Brit’s losses from hurricane Ida reached $169.3 million, but interestingly, still this didn’t trigger its main cat reinsurance it seems.

Despite the significant impacts of catastrophes, Clarke said that, “At Brit, they didn’t get any benefit from their cat reinsurance program,” during the third-quarter.

But Brit’s aggregate reinsurance protection is now close to coming into play, after impacts from events throughout 2021.

Clarke explained, “Basically, as of now, their aggregate cat losses for the year are just coming up to the retention of their cover.

“So the good news is any further, any further development or losses in the fourth quarter will be minimal for Brit.”

Brit fell to an underwriting loss of $93.5 million for Q3, so it’s safe to assume that some of the investors backing its third-party capital activities at Sussex Capital will have been impacted as well, and shared in the exposure to hurricane Ida.

But despite this, Brit reported that its fee income increased, which was “primarily from the management of third party underwriting capital.”

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