Brit’s cat losses approaching aggregate treaty cover: Fairfax
Brit’s catastrophe losses are approaching the retention for the insurer’s aggregate treaty cover after a strong cat season, according to Fairfax’s CEO Prem Watsa and COO Peter Clarke.
Brit “didn't get any benefit from their cat reinsurance program,” Clarke told analysts during the Q3 earnings call, appearing to refer to both the company’s aggregate and occurrence treaties. He added that “as of now, [Brit’s] aggregate cat losses for the year are just coming up to the retention of the cover.”
Hurricane Ida added around 33 points to Brit’s 114% combined ratio during the third quarter. Around 20% of Brit’s book is reinsurance business.
But Clarke showed optimism for the business as he said that “any further development or losses in the fourth quarter will be minimal for Brit.”
In the case of Odyssey, Fairfax executives said, the subsidiary, which has about half of its book in reinsurance business, was hit with a higher proportion of Ida’s losses.
During the third quarter of the year, Odyssey’s combined ratio jumped to 109.5% from 99.4%.
“When these events [like Ida] take place, Odyssey is going to have losses,” Clarke said, adding that “typically when we get bigger events, our reinsurance books get hit.”
However, for Fairfax overall, the executives estimated that cat exposure has remained flat, and remained confident after the conglomerate’s premiums grew around 25% year-on-year.
“So, on a proportional basis, our cat exposure, when we look at our overall book of business, is decreasing,” Clarke added.
All in all, during the third quarter of the year Fairfax swung to an underwriting loss of $43mn as $605mn in cat losses offset an averaged 25% top line growth.
Besides Ida, Fairfax underwriting results were also hit by the floods in central Europe during the summer.
“Cat exposures are very, very important. They can destroy companies,” CEO Watsa told investment analysts during the Q3 call.
He added: “We don't want to lose more than our investment income. So, we don't want our capital, shareholders' equity to drop because of cat exposure.”