Reinsurer Swiss Re, one of the largest in the world, has issued their first estimate of insured losses the firm will face from hurricane Sandy. Given its size, Swiss Re participate in many of the world’s largest reinsurance programmes and will have significant exposure across the U.S. northeast states where Sandy caused so much damage. Swiss Re has estimated its claims burden from Hurricane Sandy to be around $900m, net of retrocession and before tax.
Swiss Re acknowledge the complexity of a storm like Sandy, saying that estimates are likely to be affected by complex loss assessments, especially in the case of business interruption coverage, and are subject to significant uncertainty. The announcement says that Swiss Re acknowledge that there is a higher degree of uncertainty surrounding Sandy, compared to other catastrophe events, and their estimate may be subject to change.
“The hurricane hit the densely populated North-East coast of the US,” said Matthias Weber, Group Chief Underwriting Officer. “This led to prolonged power outages, disruption to public transport and damage to other infrastructure that have made recovery efforts very difficult. It also complicates the loss assessment process. Our claims estimate therefore is subject to a higher than usual degree of uncertainty and may need to be subsequently adjusted.”
Interestingly, Swiss Re has also estimated insurance industry losses at a range of $20 billion to $25 billion. That’s in line with the upper range of estimates from risk modellers but significantly higher than the first industry loss estimate from PCS of $11 billion. It’s going to be telling for reinsurers, and potentially for catastrophe bonds, to watch where that industry loss estimate goes at the next update from PCS. For comparison, Munich Re, the largest reinsurance company in the world, put its initial loss estimate from Sandy in the “mid three digit million Euro” range.
Swiss Re has two outstanding cat bonds which have been receiving some attention post-Sandy as they are considered potentially at risk should industry loss estimates rise. Successor Class V – F4 and the USW (U.S. wind) tranche of Globecat Ltd. both use industry wide losses within their triggers.
“Swiss Re extends its sympathies to the families, communities and businesses affected by Hurricane Sandy, and especially to those who have lost loved ones and livelihoods in the storm,” said Michel Liès, Group Chief Executive Officer. “Swiss Re will support our clients and partners in tackling this challenging situation, as we have done in so many instances in the past.”