RenRe & Markel expect typhoon Hagibis losses to eclipse Faxai

Company specific loss estimates from leading insurance and reinsurance firms for recent typhoon Hagibis appear to confirm that the industry impact of that storm are going to eclipse that of the other recent Japan typhoon Faxai.

Image from Kyodo agency (via Japan Today)

Typhoon Faxai was first to strike Japan in early September, leading to a forecast for an industry loss that has been estimated from $5 billion to as high as $9 billion, according to RMS (AIR Worldwide said $3 billion to $7 billion).

Typhoon Hagibis came along in October, striking a similar area but bringing much more damage from rainfall and flooding, as well as an expectation that the loss calculation and claims process would be significant more complicated with two storms coming so close together.

Industry loss estimates for typhoon Hagibis span a wide range, with the latest from AIR Worldwide being for an insurance and reinsurance market loss in a range of $8 billion to $16 billion.

If we focus on the mid-points of all these estimates, so a range of $3 billion (AIR’s bottom-end) to $9 billion (RMS’ top-end) for typhoon Faxai and AIR’s $8 billion to $16 billion for typhoon Hagibis, we get mid-point estimates of $6 billion for Faxai and $12 billion for Hagibis.

Now, the Faxai estimate seems a little low, based on our discussions with the market, so we’ll take $7 billion as a better mid-point, using RMS’ range there.

So on that basis, of typhoon Faxai being somewhere around $7 billion and typhoon Hagibis being somewhere around $12 billion, that would put the industry loss from Hagibis approximately 70% larger than Faxai.

So how does this compare to company specific estimates?

It’s actually pretty close, if we take the premise that Hagibis looks set to drive a 70% larger industry loss than Faxai.

Bermudian reinsurance firm and third-party capital manager RenaissanceRe has disclosed an early estimate of its losses for typhoon Hagibis along with its Q3 results.

RenRe said that on a preliminary basis, its losses from typhoon Hagibis could have an estimated net negative impact on its net income of approximately $175 million.

Typhoon Faxai caused a net negative impact to RenRe’s net income of $102.6 million, by comparison.

So, given the fact these storms were only a month apart at most and so RenRe’s exposure in Japan would remain very similar, its estimates provide a useful benchmark for how much larger Hagibis could be than Faxai.

In fact, the Hagibis estimate from RenRe is almost 71% higher than its loss for Faxai, which bears out the industry loss comparison we made above.

Markel Corporation is the other major re/insurer to provide an idea of its Hagibis losses so far.

Markel revealed that its early estimate for typhoon Hagibis is for a loss of somewhere between $60 million and $120 million, before tax.

Here, Markel seems to be taking the published industry loss range from AIR and working out its losses through an analysis of exposures and contracts at risk. The re/insurer said it will refine this range over time.

Having reported $42.6 million of underwriting losses for Q3 2019, but from both hurricane Dorian and typhoon Faxai, it’s clear that Markel too is looking at a much larger loss for typhoon Hagibis than it has suffered for Faxai.

So these early company specific estimates for losses from typhoon Hagibis are so far reflecting the gap between the industry estimates of Faxai and Hagibis, definitely suggesting Hagibis will be a double-digit billion market loss, likely at the level of $12 billion or even higher.

More may become clear as some of the larger global reinsurance firms report their results, as any disclosures they make on Hagibis may help to point towards a more accurate industry figure.

As we explained last week, SCOR has already suggested it could tap into its retrocession for Hagibis. Others are likely to follow suit.