Bermuda facing $25bn HIM losses
11 October 2017
Bermuda's (re)insurers are set to face claims of $25 billion from hurricanes Harvey, Irma and Maria (HIM), according to the Association of Bermuda Insurers & Reinsurers (ABIR).
The association estimates the island’s underwriters will bear a quarter of the estimated $100 billion insured costs from the storms and said claims were already being paid.
“Bermuda’s global insurers and reinsurers first and foremost express their sympathy to those suffering from the loss of life, property, food and water from the recent storms,” said Kevin O’Donnell, ABIR Chair and President and Chief Executive Officer of RenaissanceRe Holdings Ltd. “At this time, we are helping in the best way we can—by forwarding billions of dollars to help begin and sustain recovery in Texas, Florida, Puerto Rico, the US Virgin Islands and the rest of the affected Caribbean and Southeast US.”
“Going forward, we are committed to helping our clients and their communities rebuild more resiliently, and supporting continued innovation to help close the insurance protection gap,” O’Donnell added. “By diversifying the financial risks of these disasters to a willing global private market, we can best reduce financial burdens on exposed communities, taxpayers and policyholders.”
The Bermuda share of hurricane losses will be aggregated from business segments including commercial insurers and reinsurers; captive, or self-insurance companies; catastrophe-focused managing general agents (MGAs); and alternative capital risk funds and pools, according to the association.
“Based on historical experience, regulatory stress tests, and publicly announced preliminary estimates by listed companies, ABIR estimates the island’s (re)insurance market may absorb 25 percent or more of insured-loss claims,” it added. “Preliminary aggregated loss estimates put the total at approximately $100 billion for the three storms.”
“The value reinsurers provide is three-fold,” explained Brad Kading, ABIR’s President and Executive Director. “First, advancing cash for liquidity so insurance clients can pay consumer claims; second, transferring risk around the world and diversifying it, so the cost of hurricanes is not solely paid by policyholders and taxpayers in the affected area; and, third, by providing balance-sheet protection so while insurers are liquidating assets to pay claims, additional funds provided by reinsurers allow them to continue selling new insurance contracts daily and still meet regulatory capital targets. That helps consumers get repairs made faster and helps local economies to recover, rebuild and return to productivity.”
He added: “To successfully underwrite insurance for property exposed to natural and man-made disasters, global reinsurers pool risk to achieve a diversified portfolio,” he said. “Risk is accumulated from potential events around the world, and since such loss events are uncorrelated, global insurance groups can achieve and share with customers the benefits of diversification.” re