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Mexico earthquake and three hurricanes could cost the industry US$95 billion: SCOR


October 10, 2017   by Canadian Underwriter


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Catastrophe losses “should reach” US$95 billion, for the private insurance market, from three recent North Atlantic hurricanes and the earthquake in Mexico, SCOR SE suggested Monday.

This Sept. 24, 2017 photo shows an apartment building that was partially destroyed during the 7.1 magnitude earthquake, on Emiliano Zapata Avenue in Mexico City. The eco-friendly apartment building with its wood-paneled balconies and a solar-paneled roof collapsed when a corner column failed, and the flat-slab structure pancaked, said Eduardo Miranda, a professor of civil and environmental engineering at Stanford and global expert on earthquake-resistant design. (AP Photo/Miguel Tovar)

That figure is the “total private insured market loss for the combined Harvey-Irma-Maria hurricanes and Mexico earthquake,” Paris-based SCOR said.

Hurricanes Harvey, Irma and Maria alone cost American International Group Inc. up to US$3 billion before tax, reported the New York City-based insurer Monday. The U.S. dollar closed Friday at $1.25.

AIG noted Oct. 9 its figures were preliminary estimates that could vary, “perhaps materially,” with the insurer’s ultimate losses.

Hurricane Maria made landfall Sept. 20 in Puerto Rico, bringing a storm surge of six to nine feet and cutting electrical power to property owners in the United States island territory, Verisk Analytics Inc.’s AIR Worldwide unit reported earlier.

The Associated Press quoted the U.S. Energy Department as stating Oct 6 that just over 10% of electrical power customers in Puerto Rico had service restored.

Karen Clark & Company said Sept. 29 it was estimating the insured loss from Hurricane Maria was US$29.8 billion.

Related: Insured losses from latest Mexico earthquake not expected to exceed US$1.2 billion: RMS

On Sept. 19, Mexico was hit by an earthquake 7.1 on the Richter scale centred about 60 kilometres south southwest of Pueblo, the U.S. Geological Survey reported. More than 300 died and at least 44 buildings collapsed in Mexico City, USGS said at the time.

Hurricane Harvey made landfall Aug. 25 near Rockport, Texas. Then on Sept. 10, Hurricane Irma made two separate landfalls in Florida.

Bermuda-based Partner Re Ltd. reported Oct. 5 it is estimating that its exposure to Hurricanes Harvey, Irma and Maria will cost the company US$475 million, pre-tax, net of retrocession and reinstatement premiums. PartnerRe said that figure is based on a preliminary analysis based in part on preliminary information received to date from certain cedants.

“Given the magnitude of the Maria-estimated losses, we now believe that 2017 catastrophe losses will constitute a capital event for a number of (re)insurance companies, as opposed to just an earnings event,” Fitch Ratings Inc. said Sept. 26. “However, the industry’s very strong capital levels going into this year greatly limit any risks to solvency.”

At the time, Fitch predicted catastrophe losses for all of 2017 for the global insurance and reinsurance sectors “will exceed” US$100 billion “and could reach close to” US$190 billion on a pre-tax basis.

Fitch added Sept. 26 there is “total statutory capital of the U.S. property casualty industry” of more than US$700 billion “total global reinsurance capital” of about US$600 billion. There is “some overlap” in those two figures.

SCOR estimated its cost – from the Mexico earthquake and Hurricanes Harvey, Irma and Maria -will be €430 million net of retrocession and tax, for the three months ending Sept. 30. The euro closed Friday at $1.47.

Related: Record month of Atlantic tropical cyclones leads to major financial toll: Aon Benfield

Karen Clark & Company estimated insured losses from Hurricane Maria in Puerto Rico alone will be US$28.35 billion. Those losses are based on version 1.0 of KCC’s high-resolution Caribbean Tropical Cyclone. They include wind losses to residential, commercial, and industrial properties. Karen Clark & Company is also estimating insured losses in Dominica are US$445 million.

Hurricane Irma caused severe flooding in Havana, Miami and Jacksonville while Hurricane Harvey caused severe flooding in Houston.

AIG said Oct. 9 it “currently expects to report third quarter 2017 pre-tax catastrophe losses net of reinsurance of $2.9 billion to $3.1 billion ($1.9 billion to $2.0 billion after-tax),” reporting in U.S. currency.

That figure, AIG added, “includes pre-tax estimated losses of $1.1 billion to $1.2 billion from Hurricane Harvey, $1.0 billion to $1.1 billion from Hurricane Irma, $600 million to $700 million from Hurricane Maria, and approximately $150 million in additional catastrophe losses including Mexico earthquakes.”

That is a preliminary estimate that “involves the exercise of considerable judgment,” AIG said Oct. 9. “Due to the complexity of factors contributing to the losses, there can be no assurance that AIG’s ultimate losses associated with these events will not differ from this estimate, perhaps materially.”

Of the 40 costliest insured disasters (both natural and man-made) from 1970 through 2016, three of the top five were North Atlantic hurricanes, Swiss Re said in a sigma report – Natural Disasters and Man-Made Catastrophes in 2016 – released in early 2017. Placing first, third, fourth, seventh and nine respectively were Hurricanes Katrina, Sandy, Andrew, Ike and Ivan. Adjusted for inflation to 2016 U.S. dollars, those events cost the industry $80.7 billion, $30.1 billion, $27.4 billion, $22.6 billion and $16.4 billion respectively.

In its sigma report, Swiss Re also ranked 40 disasters from 1970 through 2016 by number of people dead and missing. Hurricane Mitch, which hit central America in 1998, took 23rd spot, with 11,683 victims. The deadliest event during that period was a storm and flood that hit Bangladesh starting in November, 1970. Earthquakes affecting China in 1976 and Haiti in 2010 left 255,000 and 222,570 victims respectively. Placing fourth was the Boxing Day 2004 earthquake and tsunami in the Indian Ocean, with 220,000 victims.