Following a spate of natural catastrophes the past quarter, investors are expecting insurers to raise rates as the latter face costly payouts. Hurricanes Irma and Harvey alone have lashed the industry, and insurers estimate losses at billions of dollars.
Late last month, Chubb estimated insured losses for Hurricane Harvey at about US$650 million, before tax (or US$520 million after tax), while losses for Hurricane Irma were between US$800 million and US$950 million, pre-tax (or US$640 million to US$760 million after tax). Meanwhile, Hiscox has forecasted an insured market loss of US$35 billion for Irma and US$25 billion for Harvey.
In its recently released third quarter financial results, the XL Group said the damage wrought by hurricanes Harvey, Irma, and Maria drove natural catastrophe pre-tax losses (net of reinsurance, reinstatement and premium adjustments and redeemable non-controlling interest) to US$1.48 billion.
“Having the chance of rate increases is quite attractive,” Mark Stoeckle, senior portfolio manager of Baltimore-based Adams Funds told Reuters.
Firms in the industry are set to disclose their third quarter finances over the coming weeks, including AIG, Allstate, Beazley, Hiscox and Swiss Re.
“The largest focus is on the pricing outlook,” Wells Fargo Securities analyst Elyse Greenspan told Reuters.
Reuters reported the S&P 500 property and casualty insurance index fell about 10% between mid-August and the end of the first week of September after the major hurricanes.
Rating agency Fitch believes that 2017’s catastrophe losses for the global insurance and reinsurance sectors will exceed US$100 billion and could even hit nearly US$190 billion on a pretax basis. Citing figures from AIR Worldwide, Fitch also noted that upper-end loss estimates for Hurricane Maria alone are US$85 billion, and that this can be added to US$50 billion from Hurricane Irma, US$25 billion from Hurricane Harvey, US$3 billion from the Mexico earthquakes, and over US$20 billion in first-half catastrophic losses from various other events.