MONTE CARLO SPECIAL MARKET NEWS, DATA AND INSIGHT ALL DAY, EVERY DAY TUESDAY 12 SEPTEMBER 2017 ISSUE 4,932 Re/insurers look to amend business plans as they hunt for post-Irma opportunities p3 ILS market undaunted by hurricanes but In depth: Cat losses pose fundamental trapped collateral may dampen liquidity questions for reinsurers p3 p9-12 Have you Rendez-vous with the Insurance Day team accessed the new website? at the Fairmont, Monte Carlo, Designed around your preferences – it’s fast, optimised for stands 1 & 2 mobile, with smart navigation and personalisation. ID-New Website-260x70.indd 1 08/09/2017 14:20 2 www.insuranceday.com | Tuesday 12 September 2017 Corporate data Cybercriminal Cyber black market To stop the bad guys, partner with the good guys. Social media, big data or your data: Today’s information technologies promise to enrich every area of our lives. But they also pose real risks – from fraud and identity theft to industrial espionage and cyberattacks. We work together with you to identify the full range of opportunities and threats, with solutions for mitigating them. It’s how we make technology work for you. Learn more at www.munichre.com NOT IF, BUT HOW Coverages are underwritten by individual member companies of Munich Re. Certain coverages are not available in all states. Some coverages may be written on a nonadmitted basis. NOT IF, BUT HOW Cyber_Bad guys_260x338_en.indd 1 07.09.16 12:31 www.insuranceday.com | Tuesday 12 September 2017 3 NEWS Re/insurers look to amend Storm surge flooding to business plans as they hunt drive large proportion of Irma losses for post-Irma opportunities Flooding looks set to drive a sig- Irma had earlier made its first nificant proportion of insured US landfall in the Florida Keys as losses from Hurricane Irma, a category 4 hurricane. Executives are already considering how strategies may which is expected to become one Robert Muir Wood, chief re- of the three costliest storms to im- search officer at RMS, said the change following 2017’s devastating hurricane season pact the US, writes Scott Vincent. storm’s earlier landfall in Cuba AIR Worldwide’s latest estimate as a category 5 hurricane had was considering potential oppor- likely to be earnings events than of losses from the storm suggests sapped some of its strength be- Michael Faulkner, tunities in marine, energy and capital events. William Haw- the US insured impact will total fore the Florida landfall. Monte Carlo Editor specialty, as well as the potential kins, analyst at Keefe, Bruyette & between $20bn and $40bn, as well The subsequent landfall in to write more flood business. Woods, said he expected Harvey as any losses incurred by the Na- south-west Florida also meant The underinsurance of flood to be enough to exhaust the ca- tional Flood Insurance Program. the storm lost the fuel supply it risk in the US is an issue that has tastrophe budgets of many of the According to Property Claim would have received had it re- e/insurers are looking been particularly highlighted by biggest reinsurers in the second Services, only 1992’s Hurricane mained over water on its jour- to amend their busi- Hurricane Harvey. Insured losses half of the year. Andrew and 2005’s Hurricane ney up to Tampa. ness plans for next year from Harvey have been estimated And while Hurricane Irma had Katrina have exceeded the low “However, Irma’s windfields as they begin to identify at around $20bn, but economic the potential to become a more end of this range. The two storms were very extensive. For that Ropportunities following the dev- losses – mainly from flooding – meaningful earnings event for the would cost $24.4bn and $49.7bn reason, both coasts have seen astating hurricanes. could be many times that. sector and would affect the pric- respectively at today’s values. storm surge of around four to While Hurricane Irma is no Sompo Canopius executive ing of renewals, it would take a While the bill from Irma will five feet,” Muir Wood said. longer the $100bn-plus event that chairman, Michael Watson, said serious capital event to trigger a be substantial, it is significant- “Storm surge will be a major had been feared last week, senior the insurer wanted to write more “hard” market. ly below the expected total had part of the loss emanating from executives told Insurance Day US inland flood risk. He told Insur- Risk perceptions and premiums Irma made a direct hit on Miami this event. Low level flooding they were looking at growth op- ance Day the company has been will likely be affected in Florida in and moved up the East Coast. will be a major impact for the portunities across a broad range working on the pricing and risk the near term. Had it followed this path, in- National Flood Insurance Pro- of classes. mapping and will be looking for Analysts at Barclays said with sured losses were expected to far gram and homeowners, while “Everyone is going to be looking “creative ways” to access the mar- hurricane season still under way, exceed $100bn. some commercial districts have at it. There are definitely opportuni- ket. “There are absolutely new op- there was “potential for reinsur- Irma’s path up Florida’s west also been impacted. ties,” the chief executive of a Lloyd’s portunities,” he said. ance prices to finally stabilise or coast saw it follow a path up “A significant portion of loss- insurer said, adding the company JLT Re’s global head of analyt- modestly increase in early 2018”. from south of the city of Naples, es from the event will come was holding a board meeting next ics, David Flandro, said: “The stars Edward Hochberg, chief execu- where it made landfall as a cate- from flood, most of which will week to discuss the issue. are aligned for private capital to tive at JLT Re North America, said gory three hurricane. be storm surge driven. Irma has Another senior executive at a enter the [flood] market and for he expected the direct and facul- It is along this path the major- the potential to become an event Bermudian re/insurer said: “Post- reinsurers to come in with some tative market to “sustain some ity of losses will be incurred. AIR similar to Katrina and Sandy, Irma we are looking at how we will kind of solution.” major pain” from Irma’s impact said the path has estimated expo- where the majority of the losses amend our 2018 business plan.” Meanwhile, Hurricanes Irma but said the market overall re- sures of around $1trn. result from flood.” The executive said the company and Harvey now appear more mained robust. ILS market undaunted by hurricanes but trapped collateral may dampen liquidity High demand for insurance-linked oversees Munich Re’s divisions will be a multiple of the expected pay up than fight such claims in according to Thomas Seidl, an ana- securities (ILS) is likely to persist in Germany, Asia-Pacific and Af- loss, which could affect investors’ court, Valentini said. lyst with Sanford Bernstein. through Hurricanes Irma and rica, said this particularly active willingness to commit further But Albertini rejected the idea Valenti confirmed that cedants’ Harvey, with yield-hungry in- hurricane season “will have price funds until the claim is resolved. that capital market investors concerns about being tied in liti- vestors waiting on the sidelines effects” in the ILS markets. Rafal Walkiewicz, chief execu- will “just go to the lawyers” to gation is a big hurdle for ILS in- for opportunities in perils old While Harvey is “probably not tive of Willis Towers Watson Se- avoid paying up in the event of vestors looking to expand into and new, writes Lorenzo Spoerry, relevant” to the alternative risk curities, said it was unclear how a large loss. new perils. Monte Carlo. transfer market, the potentially investors would respond in such Speaking to Insurance Day, In some lines of business, like Fund managers said investors much more costly Irma should be a situation. Investors might offset Aon Benfield chief executive, liability reinsurance, “every sin- had already indicated they were seen as the first real test of alter- any new limits against the trapped Eric Andersen, said he did not gle is claim is debatable,” he said, looking to increase their exposure native capital, Pohlchristoph said. collateral, he told Insurance Day. believe ILS investors are more making reinsuring this line of to natural catastrophe risk. Luca And he warned of “some con- Cat bond sponsors will be keep- likely than traditional reinsur- business a “nightmare”. Albertini, chief executive of Lead- fusion” among investors about ing a close eye on settlement times. ers to seek to avoid paying up He said, however, there exists enhall Capital Partners, an ILS terms and conditions. Alberto Valenti, who heads Gener- by going to the courts.“There the possibility for “many more fund manager, said his firm was On Barclays’ analysis, some ali’s property/casualty treaty ret- are disputes [among] tradition- deals” outside the natural ca- contacted in the immediate after- 60% of ILS issued include US rocession business, said he would al players, there are disputes tastrophe space. math of Harvey by investors will- wind cover, with a potentially be looking very carefully at “how among non-traditional players,” Mirko Sartorti, head of insur- ing to increase their participation even greater share for collater- quick the payment will be and how he said. “I don’t think anybody ance liability management at Gen- as soon as prices ticked up. alised reinsurance. is it comparable to the behaviour likes to write big cheques.” erali, said that he expects the ILS Those investors “are working Collateral issues may hamper of the traditional market”.