Reinsurers shares wobble after counting the cost of Irma and Harvey

by

The latest estimates by catastrophe expects suggest insurers will pay out $25bn as a result of Irma (Source: Getty)

Shares in the world's biggest reinsurers wobbled this morning after Munich Re warned it would likely post a third quarter loss because of hurricanes Irma and Harvey.

Munich Re shares dipped in opening trades but have regained ground and are currently down by 0.3 per cent.

Swiss Re's share price is also down 0.3 per cent, the same as France firm Scor. Hannover Re stock is up 0.6 per cent.

In a short statement yesterday evening, Munich Re said the after effects of Irma and Harvey "are expected to result in high insured losses, which the market and Munich Re are unable to quantify at the moment".

Jefferies analyst Philip Kett said Munich Re's statement is expected to be "the first of several statements from the industry, Munich Re and the European reinsurance sector".

Read more: Leading hurricane boffins put a figure on Harvey's cost to insurers

$25bn

Catastrophe modelling specialists Karen Clark and Company have estimated the insurance sector would shoulder a total bill of $25bn (£19bn) in the US and Carribean from Hurricane Irma. They have previously forecast Harvey will cost insurers $15bn.

Insurers of catastrophes such as hurricanes tend to offload much of their risk to large reinsurers. The reinsurers manage their risk through a range of techniques including issuing insurance-linked financial instruments such as catastrophe bonds.

Munich Re said in its note:

Despite good business performance in 2017 to date, the losses from Harvey and Irma could mean that Munich Re might miss its profit guidance of €2.0 to €2.4bn for the year – depending on how the business performs until the end of 2017.

The figures for the third quarter of 2017 will probably show a loss. The business and risk strategy of Munich Re ensures that even after such severe natural catastrophes the group has a sufficiently solid capital base to still be able to offer full reinsurance capacity to its clients.

Read more: Lloyd's insurers shares leap on hurricane hopes

Tags: Insurance