Swiss Re Insurance-Linked Fund Management

Original Risk: A Society for Change Agents

Sydney hail loss nears A$700m, some ILS funds to take December hit


The recent major hail storm and severe convective style weather outbreak that struck the Sydney and surrounding area of Australia in December has already driven nearly A$700 million of claims and it’s now clear that a number of ILS funds are expecting minor impacts from the loss event.

Large hail image from D-7 RoofingThe hailstorms struck the Sydney, Central Coast and South East Queensland regions of Australia on the night of December 20th into 21st 2018, causing widespread damage to residential and commercial properties and auto’s.

Two of Australia’s largest insurers were quick to reveal that their reinsurance programs would likely be triggered, to help them pay their share of claims from the hailstorm event.

IAG said that it anticipated claims from hail damage that would drive a loss at least in-line with its maximum first event retention, after taking into account its quota share reinsurance.

Suncorp said that claims will exceed its reinsurance program’s first event retention, triggering a payout, and are also eating through its aggregate reinsurance layer retention as well.

The Insurance Council of Australia said yesterday that it has already counted at least A$674 million of insured losses from claims filed with insurers.

In total, the ICA has counted 81,194 claims, with automotive damage driving the bulk of the number at 59,355, while property claims amounted to 17,175.

Meanwhile, catastrophe data aggregator PERILS AG is investigating the December 20th hail storm, to see if it is likely to reach the levels where the company will collect and report on losses to the insurance and reinsurance industry.

PERILS reporting threshold for catastrophe losses in Australia is A$500 million. So based on the information from the ICA, this hail event should easily qualify for reporting from PERILS.

We’re now aware of a number of insurance-linked securities (ILS) funds that are expecting to experience some loss impacts due to the recent Sydney area hailstorm.

These losses are expected to largely flow through quota share arrangements and collateralized participation in Australian insurer reinsurance programs, we understand.

In addition, some minor impacts may flow into a number of reinsurance sidecar vehicles, we’re told.

Among the ILS funds expected to take a small hit from this Sydney hailstorm loss are mutual funds from Stone Ridge and Pioneer, as well as some of the larger players with exposure to Australian primary insurers, we understand.

This is likely to be seen in a slight impact to December 2018 returns for some ILS funds, although we’d imagine this is not a big enough loss event to be anything more than attritional for the majority of the ILS sector.

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