Insurer and reinsurer loss estimates for the impact of hurricane Sandy continue to be announced on an almost daily. Two of the largest loss estimates in recent days come from XL Group and Zurich Insurance Group. Zurich’s in particular is seen as larger than analysts had expected. Both companies have announced losses net of reinsurance but we don’t know how big the burden they have passed on to the global reinsurance market is.
Zurich have estimated their pre-tax costs from Sandy as a claims total net of reinsurance of $700m, plus another $58m required for reinsurance reinstatement premiums. This includes $40m from Farmers Re in connection with the reinsurance cover provided to the Farmers Exchanges, which are managed but not owned by Farmers Group, Inc., a subsidiary of Zurich.
“This storm has shown us once again how powerful natural forces can be and what risks they pose. I am proud of how Zurich’s employees have been helping our customers, both before and after storm Sandy. Zurich’s strong balance sheet, healthy cash flows and risk expertise enable us to be there for our customers when they need us and to deliver on our promise,” said Zurich’s Chief Executive Officer Martin Senn.
Analysts from Nomura and Vontobel Holdings both said that Zurich’s loss estimate was higher than they had expected but noted that it won’t have a meaningful effect on the firm. We’ve seen figures which suggest that Zurich has less than 2% market share in the U.S. northeast in which case a loss of $700m points to a $35 billion industry loss so it seems likely that like AIG, Zurich have taken a larger proportion of the losses through their commercial business lines.
Meanwhile XL Group announced a preliminary loss estimate of $350m before tax and net of reinsurance and reinsurance reinstatement premiums last Wednesday. They split their loss estimate as 60% in their reinsurance business and 40% in primary lines. Within their reinsurance segment the loss estimate is composed of approximately 20% for Marine and 80% for Property Reinsurance, including catastrophe treaty, per risk treaty and facultative exposures. Within the Insurance segment, the loss estimate is composed of approximately 15% for Specialty lines, including Marine, Fine Art and Specie, and 85% for Property.
XL said that their loss estimate is in line with expectations based on current industry loss estimates, likely working off a $20 billion to $25 billion industry loss as that will fit with their market share.
Both Zurich and XL noted that their loss estimates could be subject to change due to the complexity of superstorm Sandy.
Read our articles on other U.S. primary insurer loss estimates from Sandy: