Global reinsurer Hannover Re expects to book a three digit loss for Hurricane Melissa, but is confident that its share of loss from the event will be less than the roughly €450 million of unused third quarter large loss budget.
While the third quarter was benign in terms of natural catastrophe losses, especially when compared with the active first half of the year, the fourth quarter saw Hurricane Melissa batter Jamaica as a Category 5 storm before impacting other regions such as Cuba and Haiti.
Earlier, during the firm’s earnings call with analysts, Christian Hermelingmeier, Chief Financial Officer, said in his opening remarks that the unused budget of €459 million “should be sufficient to cover the expected losses from Hurricane Melissa,” which means that the firm’s full Q4 budget is available for other losses that occur in the final quarter of the year.
During the Q&A, executives at Hannover Re were questioned further on Melissa, and while Sven Althoff, Member of the Executive Board for Property & Casualty at Hannover Re, said it’s still too early to provide a loss number as information is still being gathered, he did provide more colour on the situation.
“But to narrow the range a little bit for you, if you look at the €450 million unutilized budget for Q3, we are not expecting Melissa to use all of this €450 million,” he said.
Adding: “On the other hand, we expect this to be a three digit loss for our share, and Jamaica, from a territory point of view, is where we have a slightly above average market share.”
So, Hannover Re’s share of the loss is expected to land somewhere above €100 million but below the €459 million of unused budget, with the final figure becoming clearer as the full impacts of the storm are understood by the market.
Catastrophe risk modellers have now released initial insured loss estimates for Melissa. Moody’s RMS Event Response has estimated private market insured losses of between $3 billion and $5 billion, while Karen Clark & Company has pegged the privately insured loss in Jamaica and Cuba at $2.4 billion.
Additionally, Cotality has estimated losses to be between $1 billion and $2.5 billion, while Verisk’s Extreme Event Solutions group has warned of insured losses to onshore property in Jamaica of $2.2 billion to $4.2 billion.
Of course, given low penetration rates in the regions impacted by the storm, the economic cost is expected to be far higher, with AccuWeather posting a preliminary estimate of $48 billion to $52 billion in total damage and economic losses.
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