Q4 cat losses expected to be manageable: BofA

Fourth-quarter catastrophe losses are expected to be manageable for the U.S. insurance industry as the impact of economic and social inflation on loss costs and pricing will remain key topics for commercial lines insurers, according to a report Friday from BofA Securities Inc., a global brand for BofA Global Research.

The Friday note added that substantial pandemic losses are not anticipated. “We do not expect material losses from the COVID-19 pandemic for P&C carriers,” BofA Securities Inc said in its Friday report.

Brokers can expect to see “solid” organic growth on an improving macroeconomic backdrop and a favorable year-over-year comparison given more limited economic activity in fourth quarter last year. Margins, however, are modeled to see “modest expansion.”

The report also noted challenges to the insurtech sector “following a quarter of stark stock underperformance.”

BofA Securities’ modeled results for individual companies varied widely.

For Chubb Inc., “We expect $428 million in Global P&C catastrophe losses,” while American International Group Inc. is forecast to see $179 million in catastrophe losses.

Axis Capital Insurance Holdings Ltd., meanwhile, is expected to have $64 million in non-COVID catastrophe losses, and Arch Capital Ltd. $63 million in catastrophe losses.

Chubb’s agreement to pay $800 million related to Boy Scouts of America abuse claims is expected to generate a charge of $400 million “given reinsurance and reserves already set aside for these claims.” The insurer is not expected to see any further COVID-19 losses “due to an all-encompassing charge in 2Q20.”

AIG is also not forecast to see further losses from COVID-19, as is Axis, the report said.