"Munich, Swiss, Berkshire are reinsurers most exposed to Harvey: RBC"

From Artemis:

Analysts at RBC Capital Markets found that it is the usual reinsurance suspects that are likely to be the most exposed to hurricane Harvey on a reinsurance basis, with Munich Re, Swiss Re and Berkshire Hathaway considered the three likely to take the greatest share of reinsurance losses.

RBC’s team performed an analysis of the reinsurance programs of the largest commercial insurers operating in Texas and found that these three are the biggest reinsurance counterparties among the group it sampled.

Hurricane Harvey is still largely a flooding event, but for commercial property and industrial type coverage a greater proportion of flood risks are insured and thus backed by reinsurance, than is found with residential property risks.

Hence by analysing just commercial insurers arrangements, RBC believes it can identify where a relatively large proportion of the reinsurance exposure will come from and puts these three as top of the list for taking a share of losses.

It’s important to remember here that all three of these companies also operate as commercial insurers themselves as well, Munich Re through its Risk Solutions unit, Swiss Re through its Corporate Solutions unit, and Berkshire Hathaway through its Berkshire Hathaway Specialty Insurance.

So while the three are put at the top of the list for taking reinsurance losses from their counterparties in Texas, they are also likely to take relatively large commercial insurance losses themselves as well.

It’s also worth noting that at least two of the three are likely major participants in the $1.024 billion reinsurance program of the National Flood Insurance Program’s (NFIP), which it’s now believed could face a total loss, adding to the toll they will take.

Interestingly, Munich Re has almost twice as much of its catastrophe loss budget remaining for 2017 compared to Swiss Re, according to RBC, which could enable it to soak up a much larger loss than many competitors before it begins to see its capital impaired in any way.

That said, hurricane Harvey is not going to impair the capital of any major reinsurance firms, and is also unlikely to impair primary insurers, or smaller reinsurers as well. Given the fact wind and surge damage is expected to be so much lower than the economic cost of the flooding, it seems Harvey will not support reinsurers desire to turn pricing to any degree....MORE + many links