In a loss update ahead of its Q4 and full year 2024 earnings, specialty insurer Fidelis Insurance Holdings Limited has reported net adverse prior year development in its Aviation and Aerospace line of business of $287.2 million, which has impacted the company’s performance for both periods.
Fidelis explains that the adverse reserve development relates to business underwritten in both the 2021 and 2022 underwriting years and is impacted by aviation litigation linked to Russia’s ongoing invasion of Ukraine.
As a result, the global specialty insurer expects to report net income of between $100 million and $120 million for full year 2024, and operating income of between $120 million and $140 million for the period.
The Bermuda-based carrier notes that it has been judiciously settling claims in order to de-risk its overall exposure to the aviation litigation, and adds that part of the reason for strengthening reserves is to allow for ongoing settlement discussions and also to reflect recent developments and new information received by the firm.
So far, Fidelis has successfully settled or is in various stages of settlement discussions in respect to around two-thirds of the total exposure related to lessor policy claims currently in litigation. Of the remaining claims in litigation, Fidelis reveals that a large portion of these relate to the English trial which began in October of last year, and the company continues to hold reserves based on “probabilistic model of potential court outcomes, incorporating recent developments and updated information received.”
The English trial ended on February 14th, 2025, and a court judgment will be rendered in the months ahead.
Dan Burrows, Group Chief Executive Officer, commented: “We have meaningfully reduced our overall exposure to the complex and evolving Russia-Ukraine aviation litigation, lowered the potential downside risk associated with this event and provided increased certainty to our shareholders.
“Excluding the impact of the prior year development attributable to our Aviation and Aerospace line of business, our full-year results would have exceeded our long-term Operating ROAE target. Our balance sheet remains strong, and our business is well-positioned to support future growth and deliver long-term value for shareholders.”
Separately, Fidelis has reported a preliminary estimate of catastrophe losses from the January 2025 California wildfires of between $160 million to $190 million, net of expected reinsurance recoveries, reinstatement premiums and tax. The firm affirmed these losses will be reflected in its first quarter 2025 earnings, and that the disclosed range is based on an insured industry loss estimate of $40 billion to $50 billion.
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