The Impact of Catastrophe Lines on Select Reinsurers for the Second Quarter of 2009

Chris Westfall
Chris Westfall

Below are catastrophe-related charges to earnings reports from selected reinsurance providers. Each company provides a different level of information and transparency around its catastrophe business. As a result, some companies will have more detailed information thank others.


Axis’ reinsurance segment reported gross premiums written in the quarter of $388 million, up 22 percent from the second quarter of 2008. A company statement said that premium growth was the result of significant growth in catastrophe, property and professional liability reinsurance lines that were driven by rate increases, increased participation on treaties and new business.

A lower level of catastrophe and other large loss activity resulted in Axis’ reinsurance segment reporting a combined ratio of 69.5 percent compared with 77.3 percent in the prior year quarter. Underwriting income for the quarter of $125 million, a 43 percent increase compared with the second quarter of 2008.

Net favorable prior period development was $50 million, or 12.2 points, this quarter compared with $41 million, or 10.6 points, in the second quarter of 2008.

Endurance Re

Strong catastrophe rate increases helped Endurance report gross written premiums of $328.4 million for the second quarter of 2009, a 33.4 percent increase over n gross written premiums written during the same period last year.

Underwriting results for the quarter include a combined ratio of 84.1 percent, an increase of 6.5 percentage points from the second quarter of 2008. There was a favorable prior year loss reserve development of 7.7 percentage points during the current period, compared to 14.7 percentage points of favorable prior year loss reserve development in the second quarter of 2008.

Endurance CEO Kenneth LeStrange explained that a combination of strong investment results and the ability of the company to take advantage of business from “distressed competitors” helped to add to the company’s bottom line.

“Although markets remain competitive, our short tailed property and catastrophe lines of business have seen strong rate increases, and we continue to see unique opportunities to grow selectively.” LeStrange said in a statement.

Flagstone Re

Flagstone reported second quarter gross premiums in its reinsurance segment of $279.5 million compared to $265.9 million for the same period in 2008, an increase of or 5.1 percent.

The increase over prior quarter’s gross written premiums was mainly due to rate level increases on catastrophe exposed treaties in both North America and internationally, the company said. The boost in premiums was also assisted by a $28.7 million contribution from Flagstone Africa and Flagstone Alliance, neither of which were subsidiaries in 2008.

Gross premiums written in the second quarter include $191.8 million for property catastrophe, $44.2 million for other property and $43.4 million for specialty, compared to $204.0 million, $19.1 million and $42.8 million, respectively, for the same quarter in 2008.

Munich Re

Munich Re reported that premium income within its property-casualty reinsurance segment (which now includes Watkins Syndicate) grew by 9.7 percent to $3.5b billion in the second quarter, largely owing to the acquisition of the HSB Group.

The company said that turn-of-the year treaty renewals in property-casualty reinsurance were followed at the beginning of April by treaty portfolio renewals with a volume of some €1.3 billion, mostly in Japan and Korea and parts of the U.S. market. Prices rose substantially in heavily exposed natural catastrophe business, while prices in other areas remained stable, Munich Re said.

The P/C combined ratio was an “unsatisfactory” 98.1 percent (95.2 percent) for the second quarter, the company added.

Munich Re’s largest claims from natural catastrophes for the first half of the year were from Winter Storm Klaus (€115 million) and the bush fires in the Australian (€90 million). In the second quarter, overall loss expenditure for major losses came to $197 million, or 11.2 percent (6.2 percent) of the combined ratio.

The company added that natural catastrophes had only a small impact on its business, $79 million. About $118 million was paid or reserved for man-made loss events.

Renaissance Re

Bermuda-based RennisanceRe reported $585.6 million in total managed catastrophe premiums within its reinsurance segment to for the second quarter of 2009, an 18.7 percent rise over $493.6 million reported for the same period last year.

According to Renaissance, growth in managed catastrophe premiums was the result of the completion of the Tim Re II joint venture, attractive market conditions and organic growth.

Premium growth was offset by changes in demand of several large state catastrophe programs which Renaissance says purchased private market reinsurance in prior periods but did not renew in 2009.

Underwriting income for the reinsurance segment was $212.4 million and the combined ratio was 6.8 percent in the second quarter of 2009, compared to $157.9 million of underwriting income and a combined ratio of 30.2 percent in the second quarter of 2008.

The increase in underwriting income was primarily due to favorable development on prior year reserves of $96.4 million including reductions in estimated ultimate losses on hurricanes Gustav and Ike (2008), the United Kingdom flooding (2007) and European windstorm Kyrill (2007).

The company held $100.5 billion in catastrophe bonds as of June 30, representing 1.6 percent of its total managed investment portfolio.

As defined by the company, “total managed catastrophe premiums” are gross catastrophe premiums written by Renaissance Reinsurance and its related joint ventures. This excludes catastrophe premiums assumed from the company’s Individual Risk business.

Swiss Re

The Zurich-based reinsurer reported gross  premiums  earned  within its property/casualty segment increased  to  $4.2  billion  in  the  second  quarter  of  2009,  compared  to  $3.8  billion  in  the  second  quarter  of  2008. 

The  combined  ratio  for P/C improved  to  89.4 percent  in  the  second  quarter  of  2009  from  91.0 percent  in   the  same  period  of  the  previous  year. The change was the result  of  what Swiss Re describes as “disciplined  underwriting  and  expense  management. The company added that the combined ration was helped by the absence  of  adverse  prior  year  development.

More specifically, the  combined  ratio  for  the  property  business  was  67.7 percent  for  the  reporting  period,  compared  to  64.9 percent  in  the  second  quarter  of  2008.  The  combined  ratio  for the casulaty line improved  to  103.8 percent  in  the  second  quarter  of  2009  from  116.5 percent  in  the  same  period  of  2008,  largely  due  to  the  absence  of  unfavourable  prior  year  development. 

The information contained above was obtained from the individual companies’ financial statements. RiskMarketNews does not endorse any of the information provided.