According to an announcement from reinsurance-linked investment manager CATCo Investment Management, the latest re-survey of hurricane Sandy loss estimates has now been completed and published by Property Claims Services (PCS). After hurricane, or superstorm, Sandy struck the U.S. northeast last year, PCS first reported the industry loss estimate as $11 billion in November, a number which increased by 70% when PCS released its next estimate of $18.75 billion in January.
According to CATCo, PCS has now issued a second re-survey loss estimate for hurricane Sandy and the updated estimate remains at $18.75 billion, so no change to January’s figure.
CATCo note that PCS’ second re-survey loss estimates very often involve no change to the first re-survey, or if they do change then it is not usually a significant adjustment to the number.
PCS will continue to re-survey, with the next or third estimate due in another 60 days, until two re-surveys are completed with no change to the loss estimate. So that means that the hurricane Sandy industry loss estimate could be finalised in May.
The fact that the loss estimate has not jumped will please a number of re/insurers who have exposure to Sandy losses above a $20 billion industry loss estimate, but could also displease some who stood to collect from contracts protecting them with a $20 billion industry loss trigger. CATCo has itself set aside a retrocessional reinsurance loss provision based on an industry loss of over $20 billion, but reiterated today that it doesn’t feel any need to increase that provision in light of the latest re-survey.
Investors holding notes in the Successor X catastrophe bond, which has come very close to triggering based on an $18.75 billion industry loss, will also be pleased that the industry loss estimate has not risen further.
Lancashire Holdings are an example of a firm with a $40m ILW contract in play, with a $20 billion PCS industry loss trigger, which could have reduced its losses from the storm significantly if it paid out.
PCS is always very clear about what is included, and what isn’t included, in its industry loss estimates (it’s recent cat bond report contains a good explanation). However, given that other estimates of the insurance and reinsurance industry loss from Sandy suggest a total nearer to $25 billion and some insurers and reinsurers increased their own loss estimates in the last sixty days, there is always a chance that some disagreement with this re-survey estimate is possible within the industry.
We’ll update you again when the next re-survey estimate from PCS comes to light in May.