Swiss Re Insurance-Linked Fund Management

PCS - Emerging Risks, New Opportunities

Swiss Re expects $1.27bn hurricane Ida & Euro flood losses


Global reinsurance giant Swiss Re has provided preliminary estimates for its losses from two of the major catastrophe events of the summer months, while it says the industry loss from hurricane Ida is estimated at between $28 billion and $30 billion, while Europe’s flooding is estimated as a $12 billion industry loss.

swiss-re-building-imageAt these loss levels Swiss Re may call on some retrocessional support, we’d imagine. While it is also possible that the reinsurance company passes on a portion of its loss burden to capital market investors in its Sector Re sidecar vehicle (a quota share structure), perhaps also via its managed insurance-linked securities (ILS) fund.

Swiss Re is the first of the big reinsurers to provide a loss estimate for recent major hurricane Ida, as well as an update for the European flood events in July.

We expect other companies will follow-suit in advance of the third-quarter financial reporting season.

Swiss Re’s estimate of its loss from hurricane Ida is given net of retrocession, suggesting some recoveries are likely to be made, and before tax.

The company puts its claims burden from the event at approximately $750 million, based on the industry loss of up to $30 billion, excluding National Flood Insurance Program (NFIP) impacts.

Swiss Re’s loss from hurricane Ida appears in-line with its market share, but the industry estimate is perhaps at the lower-end of market expectations, even minus NFIP claims.

Swiss Re’s losses from the July flooding in Europe, which is likely to be concentrated in Germany, is estimated as around $520 million, again net of retrocession and before tax, based on an industry estimate of $12 billion for this event.

On the European floods, Swiss Re’s market share of the loss has surprised some analyst firms this morning, while its industry estimate is higher than expected.

In fact, the $12 billion industry loss estimate for the European flooding is the highest estimate we’ve seen, eclipsing Cresta’s announcement of an $11 billion market loss from yesterday.

The reinsurance firm notes the estimates, which combined add up to a net impact of $1.27 billion for the company, are subject to uncertainty and could need to be adjusted as the claims process proceeds.

The losses appear in-line with where analysts had been expecting for Swiss Re, as one of the more catastrophe line of business exposed of the major global reinsurance firms.

There is a strong chance that all of the major reinsurers end up sharing a portion of their losses from these events with retrocessionaires and possibly capital market investors, through sidecars, or direct retro arrangements.

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