Global reinsurance firm Swiss Re has published an estimate of its losses due to tropical cyclone Debbie at around US $350 million and the insured market loss at around US $1.3 billion, which would indicate an insurance industry burden greater than 2011’s cyclone Yasi and perhaps tip Swiss Re beyond its Q1 cat budget.
Swiss Re’s estimated $350 million of losses is net of retrocession and before tax, the reinsurance firm said this morning, and the company said that it expects the event will have caused it a larger share of large commercial and corporate losses compared to events in the past.
Swiss Re has been expanding its Corporate Solutions unit, offering commercial insurance to large corporate buyers. This means it has growing exposure to primary losses, as well as its share of reinsurance losses to deal with as well.
“This destructive cyclone caused structural damage by flooding, storm surge and wind in regions close to the Queensland coast,” commented Matthias Weber, Swiss Re’s Group Chief Underwriting Officer. “We are a lead reinsurer in this market and estimate that Cyclone Debbie has caused higher commercial and corporate losses compared to similar events in the past. We express our sympathies to those affected and will continue to work closely with our partners and clients to ensure that people receive the financial support they need to clean up and rebuild after this tragic event.”
The total market insured loss estimate of US $1.3 billion, from wind, flood and storm surge damage, is a higher figure than 2011’s cyclone Yasi, and suggests an increasing proportion of the loss from tropical cyclone Debbie will fall to reinsurance capital including some to the capital markets and ILS players.
As large reinsurers like Swiss Re utilise some capital market retrocession themselves, not least through sidecar vehicles such as Swiss Re’s Sector Re, there is the chance of some capital market investors taking losses through retro arrangements.
Additionally, some ILS investors and ILS funds will likely be exposed to Australian primary insurers reinsurance programs, which they participate in on a collateralized basis.
But still, an industry loss around US $1.3 billion is a small toll for a reinsurance industry characterised by excess capital and high levels of competition, which should help primary insurers to support rates for their customers without significant increases.
Analysts expect that Swiss Re will have taken an outsized share of the losses from Debbie compared to other large reinsurers, given its expansion in commercial insurance. They also expect that the loss from Debbie could put it over its first-quarter 2017 catastrophe budget.
The latest industry loss estimate from the Insurance Council of Australia (ICA), in terms of reported claims filed, was AU $660 million as of the 11th April 2017.