hurricane Harvey 2017

Primary insurance giant Allstate has begun to eat into its reinsurance protection after suffering an estimated $576 million of gross catastrophe losses, pre-tax, due to the impacts of hurricane Harvey.

According to market sources, both traders and ILS fund managers, following the impacts of hurricanes Harvey and Irma a number of industry-loss warranty (ILW) contracts are expected to payout, with the total at risk seen as in the billions.

The first full-year profit warning from a major reinsurance firm has been issued this morning by Talanx owned, German headquartered global player Hannover Re, which said the combined losses from recent catastrophe events could surpass its major loss budget.

Markel CATCo Investment Management has delivered a warning to investors in its flagship listed CATCo Reinsurance Opportunities Fund Ltd. that full-year performance could be erased by the impacts of recent major catastrophe events.

In recent days a handful of secondary market trades have been seen for catastrophe bonds that provide retrocessional reinsurance on an aggregate basis, as investors try to understand the potential for losses due to hurricanes Harvey and Irma’s combined impacts.

A number of outstanding catastrophe bonds have had their secondary market values marked down, as losses could be expected due to the impact of recent hurricanes Harvey and Irma. But the brokers do not currently seem to have a clear view of cat bond losses and prices in some cases diverge dramatically.

Investors in insurance-linked securities (ILS) and collateralised reinsurance investment funds are reloading in order to provide ILS fund managers with the necessary capacity to take advantage of attractively priced opportunities that have been presented in the wake of hurricanes Harvey and Irma.

Estimates of losses to the National Flood Insurance Program (NFIP) from hurricanes Harvey and Irma’s flooding are on the rise, leaving the NFIP’s administrators with the difficult task of refunding the Program which is technically bankrupt and all but guaranteeing that the $1.024 billion reinsurance layer will payout.

One of XL Catlin’s outstanding catastrophe bonds, the $300 million Galileo Re Ltd. (Series 2015-1), has been heavily discounted in trading by investors, as they look on the transaction as one of those deemed most at risk of loss due to the combined impacts of hurricane Harvey and Irma.

The talk of the morning is one of stabilising property reinsurance pricing following the impacts of hurricanes Harvey and Irma in the last fortnight, with some analysts even suggesting a little localised firming in specific pockets of the market.