Insurer Hiscox (HSX) was the worst performer on the FTSE 100 at the start of the week, dropping 2.5% to a three-month low of £14.40 after revealing a substantial third-quarter charge for catastrophe losses.
Chief executive Bronek Masojada admitted that the third quarter has been an active period for claims, with the market experiencing significant losses from storms in the US, the Caribbean and Japan.
‘Paying claims is what we are here for, and we have reserved $165m for claims from Hurricane Dorian and Typhoons Faxai and Hagibis. We expect an additional impact from lower fees and profit commissions.’
Total insured market losses are estimated at $8bn for Hurricane Dorian, $10bn for Typhoon Faxai and $15bn for Typhoon Hagibis, so the cost to the insurance sector is likely to be significant.
The losses from Dorian are contained mostly in Hiscox’s London business while the typhoon exposure is primarily through Hiscox Re and ILS.
Masojada cautioned that estimated losses from Hagibis were still unclear due to the widespread flooding it caused. Previous industry estimates for typhoon damage have proved well short of the actual losses incurred.
On top of the $165m set aside to cover claims, which is ‘materially in excess of the group’s catastrophe budget for the second half’, Hiscox expects fees and commissions to come in $25m lower than forecast at the year-end.
SOME GOOD NEWS
There was better news from its retail business where growth is picking up in the UK and US, and Europe is delivering double-digit premium growth, meaning the unit is on track to meet its full year profit target.
There was also some positive news on pricing in the London market and the reinsurance business. Gross written premiums climbed almost 10% in the third quarter as pricing improved across most insurance lines.
However this was tempered by a higher number of large losses, with claims totalling $30m in the US public company directors’ and officers’ (D&O) business, property, marine, energy and space portfolios. There has also been a rise in claims in some US casualty business.