Bermuda-based insurers Arch Capital Group Ltd and PartnerRe Ltd. Have released their respective preliminary estimates of losses incurred from Hurricane Sandy.
Arch said its preliminary estimate of losses “ranges between $170 million and $240 million, net of reinsurance and the effects of reinstatement premiums.” It is “preliminary,” as it is “based on projected industry insured losses ranging from $20 billion to $25 billion,” Arch explained. “The losses from the storm are currently estimated to arise approximately 40 percent in our insurance operations and 60 percent in our reinsurance operations.”
Arch also pointed out that “due to the unusual nature of the storm, including its broad scope, the number of insureds affected, the complexity of issues contributing to the losses and the preliminary nature of available information, there is substantial uncertainty regarding total covered losses for the insurance industry and the assumptions underlying the Company’s estimates relating to the event.
“The Company’s preliminary estimates for the storm are based on currently available information derived from modeling techniques, industry assessments of exposure, preliminary claims information obtained from the Company’s clients and brokers to date and a review of in-force contracts”
Arch added that its “actual losses from this event may vary materially from the estimates due to the inherent uncertainties in making such determinations resulting from several factors, including the preliminary nature of available information, the potential inaccuracies and inadequacies in the data provided by clients and brokers, the modeling techniques and the application of such techniques, the contingent nature of business interruption exposures, the effects of any resultant demand surge on claims activity and attendant coverage issues. In addition, actual losses may increase if the Company’s reinsurers fail to meet their obligations to the Company or the reinsurance protections purchased by the Company are exhausted or are otherwise unavailable.”
PartnerRe Ltd. Said it “expects to record a charge of between $200 million and $240 million, pre-tax, net of retrocession and reinstatement premiums, in its fourth quarter 2012 results, related to Superstorm Sandy.
The announcement explained that the “majority of its losses will come from accounts with commercial line exposures. A number of business lines written by the Company are impacted by Superstorm Sandy, including catastrophe treaties, property per risk treaties, marine treaties, engineering treaties and facultative policies. This charge is expected to impact the Company’s Catastrophe, U.S. P&C, and Global Specialty sub-segments.”
PartnerRe also observed that the “estimated losses are based on information received from the Company’s cedants, supplemented by other loss estimation techniques employed by the Company, and considers all of the Company’s exposures. There is considerable uncertainty associated with any loss estimate, which in this instance, is further complicated by the inherent uncertainties involved in the claim settlement process. The ultimate loss, therefore, may differ materially from the current estimate.”
Sources: Arch Capital and PartnerRe
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