Reinsurance: Japan Earthquakes, Canada Wildfire to Take Natural Catastrophes Over Budget in Q2--JPM Cazenove

From Artemis:

Losses due to natural catastrophes in the second-quarter of 2016 are expected to exceed the catastrophe budgets of major reinsurance firms, as the Kyushu, Japan earthquakes and Fort McMurray, Canada wildfire erode Q2 profits.

Analysts at J.P. Morgan Cazenove suggest that the Japanese earthquakes in Kyushu could cause a $3 billion insurance industry loss, while the Fort McMurray, Canada wildfires could result in an insured loss as high as $4.8 billion, according to their estimates.

It’s the first quarter in a long time that insurance industry losses from natural catastrophes have been forecast to go above the budgeted loss totals of the major reinsurance firms. However the analysts note that this is unlikely to be sufficient to trigger any upwards movement in pricing as it will only erode some of the capital buffer built up over recent years.

“Our conclusion is that Munich, SwissRe and SCOR may have a potential impact equivalent to 8-11% of 2Q16e net profit,” the analysts explain.

They note that these impacts are relatively modest, but that they could be significant in terms of eroding some of the capital buffer available to cover any U.S. hurricane losses in the third-quarter of the year.

The J.P. Morgan Cazenove analysts high insured loss estimate for the Fort McMurray wildfires, at $4.8 billion, is they say due to the fact the fire has continued to burn since early loss estimates came out and they are adding 10% for reserving conservatism....MORE