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Harvey, Irma : limited impact on the reinsurance market

by

Mathieu Carbasse

11 September 2017, 13:15

Photo : Texas National Guard

Gathered together in the framework of a round table organized by the S&P Global Ratings in Monte-Carlo on the 10th of September, experts from the reinsurance to have agreed that the hurricanes Harvey and Irma are more likely to be events of gains (or earnings events) as events of capital (capital events). Also, these two disasters are expected to affect reinsurers ‘ results for the current year, without reducing their capital reserves.

William Hawkins, analyst at Keefe, Bruyette & Woods, pointed out that it was expected that the hurricane Harvey is sufficient to deplete the budgets of the «disasters» of several large reinsurers for the second half of the year, but not worse than that.

An impact on the pricing of renewals

Noting that the level of uncertainty surrounding the losses to the two events remains very high, Mr. Hawkins, however, insisted that the pricing of renewals is likely to be affected. For David Flandro, head of global analysis at JLT Re, even the sound of a bell : the storms are more likely to be events earnings events capital for the industry.

Thomas Lillelund, CEO ofAspen Re, said that he expected that the loss of Harvey and Irma affect the price — certainly in the United States and perhaps elsewhere. «There is still a large uncertainty, but I expect a reaction from the industry, he said, recalling that the price had plunged more than expected for renewals of June.

Changing perceptions of the risk premiums

David Flandro also noted that these storms will ensure that the industry re-evaluates its ability to model these events, including the trajectories as unusual as the one that hurricane Harvey has taken.

«I’m agree to say that the industry has the capital to deal with these losses, but they could have the effect of changing the perceptions of the risk premia and the behavior of rulers. Some companies will not have a great year, and, at a minimum, these losses should lead to renewal terms of 1/1. But a lot depends on the next 24 hours, » said Mr Flandro.

«There to manage uncertainty»

Mike Krefta, CEO of Hiscox Re, has for his part said that it was useless to speculate on the losses of hurricanes at this stage, adding that the industry players should not forget that they are there to manage the uncertainty and to assist customers in their time of need . «This is what we need to do. We must ensure that we find ways to actively help the market after these events and help clients to manage the uncertainties in the future «..

Mr. Krefta said that there are opportunities to close the gaps of protection, whether in terms of human capital or technology. These represent a tremendous opportunity for the market, he explained.

«It is always difficult when horrible things are happening with natural disasters, but opportunities to close the gap protection are very actual. We can guide people in this process, by ensuring that they have insurance against flooding. There are huge opportunities and we should address these problems. «

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