RenaissanceRe, the Bermuda headquartered specialty re/insurer and third-party reinsurance capital manager, has pre-announced an expected $345 million of losses from natural catastrophes and COVID-19 suffered during the fourth-quarter of 2020.
As a result of these losses, RenaissanceRe (RenRe) says that when it announces its Q4 2020 results in the coming weeks it expects to report net income, but an operating loss, both attributable to the reinsurance firms common shareholders.
On the natural catastrophe and severe weather side, RenRe includes weather-related catastrophe events from the third and fourth quarters of 2020 in an estimation of $170 million of losses to be reported in its fourth quarter 2020 results.
This includes losses from Hurricanes Delta, Zeta and Eta, as well as aggregate losses related to these and other events, and some changes to estimates from third quarter 2020 weather-related catastrophe events.
It’s interesting that RenRe cites aggregated losses from Q4 as an issue, as there has been some market discussion of a number of aggregate reinsurance contracts being triggered during the final months of last year and erosion of deductibles also continued, we understand.
RenRe has also added an estimate of fresh losses from the COVID-19 pandemic, saying it expects around a $175 million impact to its fourth-quarter results.
Interestingly, the vast majority is expected from property reinsurance lines of business, RenRe said, estimating that as much as $165 million could fall to its Property segment, largely incurred but not yet reported (IBNR) and related to exposures such as business interruption coverage.
The rest of the COVID-19 losses is related to RenRe’s Casualty and Specialty segment.
The disclosure of $165 million of largely business interruption related property losses from the pandemic could be a trend worth watching as the final quarter results roll-out over the next few weeks.
With some reinsurance treaties having triggered in Europe and others facing some pressure elsewhere around the world, there is a chance the overall COVID loss disclosures tick up more meaningfully at this reporting juncture, if these increases are experienced more widely.
It’s also worth remembering that there is a chance some of the losses will have been shared with third-party investors in the range of joint-venture, sidecar and ILS funds that RenRe operates.
In particular the catastrophe losses may have been shared with third-party capital through some of the joint-ventures.
But it is also possible some property related losses from COVID could flow to certain structures backed by third-party investors, although it’s impossible to be certain and unlikely to be clearly disclosed when RenRe’s results are reported.
In fact, RenRe had said earlier this year that a large proportion of its property book saw losses shared with retrocession and venture partners, when asked about COVID loss potential. So there is a chance some of this IBNR from business interruption claims may hold some exposure for investor backing certain structures.
Kevin J. O’Donnell, President and Chief Executive Officer of RenaissanceRe, commented on the loss pre-announcement, “In the fourth quarter, people and communities around the world were negatively impacted by persistent weather-related catastrophe activity as well as the ongoing consequences of the COVID-19 pandemic. We extend our sympathies to all those affected by these tragedies. Consistent with our long-term track record, our strong capitalization enabled us to meet the quarter’s challenges while continuing to build trusted long-term partnerships.”