Goldman Sachs estimates $45bn of P&C industry insured losses from Hurricane Ian

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According to a report from Goldman Sachs, Hurricane Ian was the most notable catastrophe in the quarter, with the firm estimating $45 billion of P&C industry-insured losses, excluding those from the NFIP program.

Goldman-SachsOther industry loss estimates vary, but remain high, with Verisk assuming re/insurance industry loss between $42bn-$57bn.

CoreLogic placed the upper bound of losses at $47bn, while rating agency Fitch was lower still at $40bn. KBW estimates losses to be somewhere in the “low $30bn range.”

The report adds, “We note that the hurricane’s path in Florida can be most closely compared to Hurricane Irma in 2017, which produced $33.4bn of losses.

“While the event is quite large and ultimately may prove to be one of the costliest in Florida’s history, we see the impact for the primary insurers we cover being more of an earnings’ event in the current quarter rather than a capital event.”

This is chiefly due to the combination of companies decreasing their footprint in the Florida homeowners insurance market, says Goldman Sacks, along with reinsurance coverage helping limit the impact on book value.

The firm adds that while Hurricane Ian is a major catastrophic event, there were relatively benign cats prior, which may serve as a modest partial offset to net losses from Ian.

The report notes, “Globally, we see $51bn of insured losses, representing 173% of the 10-year average of $29bn mainly driven by Ian.

“Outside of Hurricane Ian, we expect the largest losses to public (re)insurers to stem from Typhoon Nanmadol in Japan (estimated $2bn+ total insured loss), while US flooding and drought in China are also expected to reach into the billions of economic losses, but not in terms of insured losses.

“Hurricane Fiona largely resulted in flood-related damage, and of our covered P&C companies, only CB has a top 10 market share in Puerto Rico. Business interruption losses as a result of widespread power outages in Puerto Rico could be a loss driver, but current economic loss projections for Fiona remain in the low single-digit Billions.”

NOAA data indicates a below-average quarter for severe weather frequency. Though the variance is more modest with extrapolated 3Q22 weather events down -9% versus a trailing 5-year average and -12% versus 3Q21. July severe weather events increased 20% YoY while August events were -40% below YoY, with September events also tracking down.

the report adds that TRV and HIG have noted a favourable YoY impact of non-cat weather in 3Q21, but TRV noted that non-cat weather was above its expectations in absolute terms.

Goldman Sachs suggests that these data points imply the possibility that insurers could see a modest favourable impact from non-cat weather, and materially de-risk’s the possibility of above-average non-cat weather.

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