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Ian could be a capital event for reinsurers: Experts


DALLAS – Hurricane Ian, which made landfall in Florida on Sept. 28 as a Category 4 storm, could be a capital event for reinsurers, according to industry experts attending the American Property Casualty Insurance Association annual meeting.

Verisk Analytics Inc. has said the industry loss could be between $42 billion and $57 billion, while initial estimates by catastrophe modeling firm Karen Clark & Co. put insured losses from Ian, including demand surge and litigation effects, at close to $63 billion.

A $63 billion loss, if that’s the right number, would certainly be a balance sheet event for many reinsurers, said Keith Wolfe, president of U.S. property/casualty at Swiss Re Ltd.

“It would not just destroy earnings for the year, it would eat into their actual capital surplus, which again, would just be another piece of momentum in the wrong direction for trying to solve the supply-demand imbalance,” he said.

Mr. Wolfe and others were speaking to Business Insurance Monday on the sidelines of the APCIA meeting.

It’s a bit premature to say whether Hurricane Ian will be a capital event for the industry, said Greg Heerde, head of Americas analytics, reinsurance solutions at Aon PLC.

At a minimum, it will be an earnings event, and there could be some capital erosion, Mr. Heerde said.

“A $63 billion loss would erode earnings and dip into capital. It wouldn’t erode all of the unrealized losses,” he said.

Global reinsurer capital declined by 11 percent, or $75 billion, to $600 billion in the first half of 2022, mainly driven by substantial unrealized losses on investment portfolios, Aon said in its reinsurance renewal report published in September.

“Reinsurers will be able to hold the overwhelming majority of their securities to maturity, and those unrealized losses will revert back over time,” Mr. Heerde said.

Rob McKenzie, North American sales leader at Guy Carpenter & Co. LLC, said it’s too early to say what the insured loss from Hurricane Ian will be just five days after the event.

“It could be more of an earnings event. But if it comes in at the upper end [of loss estimates], it starts to exceed that,” Mr. McKenzie said.

“Until there’s a clearer picture as to really what the number truly is from an insured loss perspective, it’s hard to say,” said Will Garland, president, centers of excellence at Guy Carpenter.