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TMCNet:  Best's Special Report: Third-Quarter Catastrophes Will Define 2017

[January 11, 2018]

Best's Special Report: Third-Quarter Catastrophes Will Define 2017

Third-quarter 2017 results show that the spate of hurricanes during that timeframe significantly impacted earnings but are unlikely to constitute a capital event for most insurance and reinsurance companies, according to a new A.M. Best special report.

The Best's Special Report, "Third-Quarter Catastrophes Will Define 2017," states that with third-quarter 2017 earnings having been reported, it is possible to start measuring the true impact of hurricanes Harvey, Irma, and Maria (HIM) on insurers and reinsurers. The report lists the companies that have publicly reported net losses of greater than $100 million from all three hurricanes.

Primary insurers, traditional reinsurance, collateralized reinsurance and insurance-linked securities all will be paying a portion of approximately $90 billion in losses. The reinsurers A.M. Best rates remain well-capitalized and reported losses have been well within their risk tolerances, though there could be adverse development. Due to the aggregate losses from three storms combined, the retro-reinsurance market likely will be covering a large portion of the HIM losses.

Although it is still too early to tell which catastrophe bonds will be paying out, those with annual aggregate protection that cover all U.S.-named storms and industry los warranties are the most likely to have been triggered. However, even though investors suffered losses from the third-quarter catastrophes, there was still an influx of additional capital in the fourth quarter, some from multiple catastrophe bond transactions covering U.S.-named storms, indicating that these events have not scared off investors.

Insurers and reinsurers have increased capacity in recent years by using third-party capital, and most of these investors will have to pay out major losses for the first time. Capital has been flowing back into the insurance and reinsurance markets, so A.M. Best does not expect a significant change in investors' appetites for insurance risk over the short term. Although many in the reinsurance and retro-reinsurance markets have been pushing for large rate increases as a result of the catastrophe losses, third-party capital may act as a moderating influence on rate hikes. Property rates in loss-affected areas likely will see the largest increases, but time will tell if the 2017 hurricanes will have a meaningful impact on the entirety of the reinsurance market.

To access the full copy of this special report, which also explores the impact of each of the hurricanes on a stand-alone basis, please visit

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