Reinsurers would pick up 20% of a $10bn Florence loss: Buckingham

The reinsurance industry would be likely to pick up only $1.5bn to $2.0bn of claims from a $10bn industry loss for Hurricane Florence, according to Buckingham Research analyst Amit Kumar.

He estimated that a 15-20 percent share of the loss was likely, compared to roughly 20 percent of last year’s HIM loss (with ILS markets picking up another 20 percent of the latter).

Kumar’s starting point was CoreLogic’s $3 to $5bn estimate, which he lifted to $10bn to account for flood losses, including insured flooding, National Flood Insurance Program (NFIP) flooding, and state windstorm pools.

His calculation of the reinsured loss assumed that the NFIP reinsurance fell short of triggering, assuming the organisation picked up a similar share of overall losses from Florence as it did for Harvey.

On this basis, Kumar’s prediction was that NFIP losses would be $2.3bn, short of the $4.0bn reinsurance trigger.

Allied World, Axis Re, Gen Re, Hannover Re, Liberty, Markel Global Re, Munich Re, QBE Re, RenaissanceRe, Scor, Swiss Re, Cincinnati Re, TransRe, Validus Re, XL Re and 13 Lloyd's syndicates, provide cover reinsurance for NFIP. https://www.fema.gov/nfip-reinsurance-program

The North Carolina coastal insurance pool will likely face significant losses from Florence, but the pool is reinsured at a relatively high retention.

Losses below $1.69bn will mean just $100mn being called on from reinsurers.

However, the South Carolina Windpool has a much lower retention than its neighbour, with reinsurance for all losses between $10mn and $740mn.

Listed insurers exposed to the North Carolina include Allstate, with a 7.4 percent market share, Travelers with 4.5 percent of the market and Progressive with 3.8 percent.

Kumar also raised the prospects of a Florida style spike in Assignment of Benefits (AOB) claims after Florence.

AOB is when an insured passes their right to indemnity over to a contractor. The practice has led to significant loss creep in Florida, following Hurricane Irma a year ago.