RenaissanceRe (RenRe), the Bermudian insurance and reinsurance underwriter and joint-venture capital manager, estimates that its net losses from third-quarter 2019 catastrophes will reach $155 million, after taking into account risk shared with third-party investors and loss of any associated fee income.
RenRe explained that it estimates the third quarter 2019 impact of catastrophe losses to be a net negative impact of roughly $155 million on its results, but stated that it still expects to generate a “modest” income for the period.
The third-quarter included hurricane Dorian and typhoon Faxai, for which RenRe estimates the Q3 loss will be split $100 million for Dorian and $55 million for Faxai.
That’s a lower Faxai loss than comparable re/insurers are estimating, suggesting either that RenRe has more retrocession in place for Japanese exposures, is sharing more of its Japanese risks with third-party investors, or has a lower market-share in the country perhaps.
RenRe doesn’t expect that Q3 catastrophes will wipe out its profits for the period though, saying it anticipates reporting modest net income and operating income at its results in the coming weeks.
Kevin J. O’Donnell, CEO of RenaissanceRe, commented on the estimates, “We extend our sympathies to all those affected by recent catastrophic events and recognize the significant human impact, particularly in the Bahamas and Japan. As always, we hope to improve the resilience and sustainability of communities by supporting recovery and rebuilding efforts through rapid payment of claims and superior service to our customers.”
RenRe said that its estimate of net negative catastrophe loss impact includes, the net total of claims and claim expenses incurred, earned reinstatement premiums assumed and ceded, lost profit commissions and redeemable noncontrolling interest.
That means these estimates are after the benefit of any reinsurance, retrocession and sharing of losses with the various third-party capital vehicles, insurance-linked securities (ILS) funds and joint-venture vehicles that RenRe manages.
The estimates also factor in any reduction in third-party reinsurance capital management fees earned as well.
Analysts at KBW said that they were adding around $52 million to its estimate for RenRe’s Q3 incurred losses, suggesting RenRe’s figure is above where they had anticipated them to be.
So far, of the reinsurance firms estimating their Q3 2019 catastrophe losses, AXIS Capital has set aside the highest estimate as a percentage of 2019 shareholders’ equity, Everest Re the next and then RenRe, followed by Arch Capital.
Each of these companies has likely passed on some of its third-quarter catastrophe losses to third-party capital investors, as their reliance on risk sharing increases and the amount of capital within their joint-venture reinsurance arrangements and private ILS transactions increases.