The second estimate of hurricane Sandy insured losses has been released by Property Claims Services (PCS) this week. The first estimate of $11 billion which PCS reported in November has been increased by 70% to a new total of $18.75 billion. This number is very close to the total of reported loss estimates from insurers and reinsurers and still short of the $20 billion mark when a number of reinsurance contracts and industry loss warrants (ILWs) could be triggered.
The updated industry loss estimate from PCS has been awaited by insurers and reinsurers with some trepidation. A number of reinsurers and reinsurance-linked investment vehicles have exposures which begin at the $20 billion or $25 billion industry loss total. With the announcement of an $18.75 billion industry loss these positions remain safe for the moment, but given the complexity of a loss like hurricane Sandy the next update from PCS could tip just over the $20 billion mark.
PCS is a good proxy for the property and casualty line losses that the insurance and reinsurance industry have suffered from Sandy. In fact, the estimate of $18.75 billion is very close to the reported loss total, which currently sits around $18.777 billion according to data from Fitch Ratings and the addition of some large estimates from Allianz and Hannover Re that we’ve collated in the table below. The PCS figure does not include offshore marine losses and given that the marine insurance sector is facing one of the largest losses in its history, that alone could be enough to tip the figure over $20 billion.
For exposed ILWs and reinsurance contracts which use the PCS industry loss estimate as a settlement figure or trigger there will now be a nervous wait until the next update is delivered later this quarter.
The new loss estimate from PCS comes very close to triggering Swiss Re’s Successor X Ltd. (Series 2011-3) Class VF-4 unrated catastrophe bond notes, according to some sources. The current industry loss estimate of $18.75 billion falls close to the industry loss index trigger point for the Successor notes according to some investors internal modelling, although another investor we spoke with believed it may already have been triggered. Some uncertainty clearly continues to exist.
Given that the general expectation from sources we’ve spoken to is that the PCS industry loss estimate will rise again at the next reporting interval, it seems likely that the Successor X Class V-F4 cat bond notes will face some sort of loss. We will update you should any further information become available on the fate of this cat bond.
Table of reported losses from hurricane Sandy.
| Insurer or reinsurer | Min estimate | Max estimate |
|---|---|---|
| Lloyd’s | $2,000 | $2,500 |
| American International Group | $2,000 | $2,000 |
| Allstate Insurance Group | $1,075 | $1,075 |
| Travelers Cos. Inc. | $1,000 | $1,000 |
| SwissRe | $900 | $900 |
| Chubb Corporation | $880 | $880 |
| Zurich | $758 | $758 |
| State Farm | $644 | $644 |
| Munich Re | $642 | $642 |
| Allianz | $590 | $590 |
| ACE Ltd. | $475 | $475 |
| QBE Insurance, Ltd. | $350 | $450 |
| Alleghany Corp. | $443 | $443 |
| Axis | $375 | $375 |
| Hartford Fire Group | $350 | $350 |
| XL | $350 | $350 |
| Hannover Re | $348 | $348 |
| USAA Group | $334 | $334 |
| Validus | $333 | $333 |
| NJ Manufacturers | $300 | $300 |
| Everest Re | $275 | $275 |
| Arch | $170 | $240 |
| PartnerRe Ltd. | $200 | $240 |
| Amlin PLC | $230 | $230 |
| Assurant | $200 | $220 |
| Aspen Insurance Holdings Limited | $219 | $219 |
| Hanover | $185 | $215 |
| Catlin Group Ltd. | $200 | $200 |
| Tokio Marine | $170 | $170 |
| Allied World | $165 | $165 |
| Endurance | $160 | $160 |
| MetLife Inc. | $131 | $146 |
| Hiscox Ltd. | $143 | $143 |
| RenaissanceRe | $130 | $130 |
| Markel | $75 | $125 |
| Alterra | $90 | $120 |
| Montpelier Re Holdings Ltd. | $95 | $95 |
| Tower Group Inc. | $85 | $95 |
| Beazley (London) | $90 | $90 |
| Progressive | $90 | $90 |
| Lancashire | $40 | $60 |
| Argo Group | $45 | $55 |
| Selective | $52 | $52 |
| W. R. Berkley Corp. | $40 | $50 |
| Kemper | $45 | $45 |
| Flagstone | $39 | $39 |
| Platinum Underwriters Holdings Ltd. | $38 | $38 |
| American Financial Group Inc. | $25 | $35 |
| Cincinnati Financial | $25 | $35 |
| HCC Insurance Holdings Inc. | $30 | $35 |
| Maiden Holdings Ltd. | $25 | $35 |
| United Fire Group Inc. | $23 | $35 |
| Mercury General | $20 | $30 |
| Novae Group Plc | $25 | $30 |
| Country Financial | $24 | $25 |
| Navigators | $18 | $25 |
| RLI Corp. | $15 | $20 |
| American Safety Insurance | $9 | $11 |
| Meadowbrook Insurance Group Inc. | $5 | $7 |
| Total | $17,793 | $18,777 |
.
Here’s a reminder of the main insured loss estimates from risk modellers and PCS’ first estimate:
– EQECAT at $10 billion to $20 billion
– RMS at $20 billion to $25 billion
– PCS initial estimate at $11 billion
– AIR Worldwide at $16 billion to $22 billion
– Reinsurance broker Holborn said Sandy could cost up to $30 billion
– Swiss Re estimate Sandy’s industry loss at $20 billion to $25 billion
– Munich Re said they expect Sandy to cost $25 billion
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