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Hurricane Ian slams Arch Capital third-quarter results

Marc Grandisson

Arch Capital Group Ltd.’s third-quarter results were decimated by losses related to Hurricane Ian, as the Pembroke, Bermuda-based insurer and reinsurer reported net income fell 98.2% to $6.9 million.

On the company’s earnings call Thursday, François Morin, Arch’s chief financial officer and treasurer, referred to the company’s Oct. 19 loss bulletin estimating Ian losses at $530 million to $560 million, which he said were the largest in the company’s history.

Arch’s third-quarter combined ratio worsened 5.9 points to 97.3% as the catastrophe losses took their toll.

Net investment income rose 49.9% to $128.6 million.

In the insurance segment, net premiums written grew 18.63% to $1.37 billion. Net premiums written in the reinsurance segment increased 73.62% to $1.08 billion.

Third-quarter catastrophe activity has “significantly” increased pressures on property/casualty markets, which could have ripple effects across all property/casualty lines approaching 2023 renewals, Arch CEO Marc Grandisson said on the earnings call.

He added, however, that Ian would be a “quarterly earnings event” and not approach any critical capital metrics.

Mr. Grandisson, without providing specific figures, said Arch would be increasing its support for cyber coverage because markets have improved as policyholders and insurers have become more vigilant in their efforts to mitigate cyber risk.

He also noted the property/casualty market has in recent years been supported by less expensive alternative capacity such as insurance-linked securities.

Recently, however, investors have begun to leave the ILs market as they have seen a decline in performance, which could lead to a capacity crunch in the sector. “There appears to be a shortage of players with capacity and willingness to participate,” which possibly could lead to a “supply shortfall,” Mr. Grandisson said.