RenaissanceRe, the Bermudian reinsurer and third-party reinsurance capital manager, has announced an estimated net negative impact of $155 million from catastrophe events in the third-quarter, which suggests some of these losses will flow to investors in the firms third-party capital vehicles.
RenaissanceRe (RenRe) said that its losses from third-quarter 2018 catastrophe events will result in an estimated net negative impact of around $155 million to its Q3 2018 results.
As a net negative impact it’s safe to assume that this figure is after retrocession and also some of the third-party investor-backed vehicles have taken a share.
Typhoon Jebi and hurricane Florence are largely reponsible for the impact to RenRe in Q3, with the reinsurer expecting a $70 million hit from the typhoon’s impacts in Japan and $55 million from Florence’s hurricane winds and flooding impacts to the U.S. eastern region.
The other $30 million of Q3 catastrophe losses are attributed to an aggregation of losses from events such as typhoon Mangkhut’s impacts in Asia, likely concentrated in Hong Kong and China, as well as typhoon Trami’s impacts in Japan, and the California wildfire losses, which are most likely related to the Carr wildfire in the main.
Despite the losses, RenRe expects that it will still be able to report a modest net income for its shareholders from the third-quarter, so these events are not expected to wipe out earnings completely.
Kevin J. O’Donnell, CEO of RenaissanceRe, explained, “It was an active quarter for catastrophic events around the world, most notably in Japan and the United States, and we extend our sympathies to all those affected. Consistent with our 25-year track record as a global reinsurer, we stand ready to support all of our cedents by rapidly paying their claims and continuing to deliver on our promise to provide superior customer relationships.”
Equity analyst firms largely agreed that RenRe’s Q3 loss burden looks set to be higher than had been forecast.
The reinsurance firm said that its estimate of net negative impact includes taking into account lost profit commissions, part of its third-party capital related activity revenues, as well as redeemable noncontrolling interest.
There could be some exposure for investors in RenRe’s third-party collateralized catastrophe retrocession and reinsurance fund Upsilon due to these events, we’d imagine. While third-party capital venture DaVinciRe is certain to have taken a share of the ultimate losses RenRe’s book suffered.
Whether it could hit the Fibonacci collateralised sidecar like vehicle remains to be seen, as we understand this tends to allocate its capital a little higher up in the reinsurance tower, but it is possible.
With major reinsurance firms such as Swiss Re now also announcing their exposure to third-quarter catastrophe events, and the estimates being higher than had been anticipated, it suggests a trend that will continue through the results season and also potentially more of the losses flowing to some ILS strategies.