Basing its top-down view of Hurricane Ian losses on RMS’s $67bn estimate, JP Morgan has suggested that Munich Re and Swiss Re are likely to have the largest market share of Ian losses.
JP Morgan observes that RMS gave a range of $53-74bn, with an additional $10bn in losses for the National Flood Insurance Programme from storm surge and inland flooding.
It adds that the scale of the event using RMS’s best estimate would make it the costliest loss of all time on an absolute basis.
Although, it notes that Hurricane Katrina adjusted for inflation would have cost around $90bn in 2021 values. Therefore, JP Morgan suggests it is reasonable to assume that large loss or catastrophe loss budgets will be more than exhausted in the third quarter.
The firm notes, “We base our Hurricane Ian estimates by company on a market share basis. Disclosure on various scenarios and also exposure by region by the reinsurers is limited; therefore, we accept that some of our estimates are a tool for estimating exposure rather than a more precise methodology.
“We assume the highest impact on the largest reinsurers, Munich Re and Swiss Re, with the impact smallest in absolute terms at the Lloyd’s names, however, this will depend on protection bought by the companies and individual exposures.”
Additionally, JP Morgan notes it has seen material macro movements in the quarter with the 2-year US treasury yield moving up a further ~135bps since the beginning of Q3.
The firm includes this impact in its estimates, noting that for the majority of companies, this impact leads to a further reduction in shareholders’ equity. For Beazley and Hiscox, this leads to further unrealised losses in the quarter but an uplift to 2023 earnings due to higher yields.
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