Liberty Mutual, the U.S. primary insurance giant and global reinsurance player, has revealed that hurricane Ian has delivered it $845 million of pre-tax and net catastrophe losses during the third-quarter.
That’s higher than Liberty Mutual’s loss from hurricane Ida last year, which the company pegged at $812 million, again net and pre-tax.
The combined ratio was up 1% on the prior year, at 105.4%, indicating an underwriting loss for the third-quarter of the year, with catastrophe losses being 11.7 points of that.
Overall third-quarter catastrophe losses hit a net total of $1.4 billion for Liberty Mutual in Q3.
For a comparison, insurer Allstate announced third-quarter catastrophe losses of $763 million, with $671 million gross from hurricane Ian and a reinsurance recovery of $305 million anticipated.
Given the magnitude of Liberty Mutual’s loss, it seems highly likely the company will make some reinsurance recoveries to support its paying of hurricane Ian claims.
Liberty Mutual has a property catastrophe reinsurance program that provides protection for hurricane losses in excess of $500 million of retention in the United States, with up to $3.1 billion of coverage available from the excess-of-loss treaty
On that basis, hurricane Ian’s losses look to have exceeded the per-occurrence retention on Liberty Mutual’s reinsurance program, suggesting the gross loss from the hurricane may have been above $1.345 billion.
Interestingly, Liberty Mutual has two outstanding catastrophe bond issuances that are still in-force, the $300 million Mystic Re IV Ltd. (Series 2021-1) and the also $300 million Mystic Re IV Ltd. (Series 2021-2).
Both provide per-occurrence reinsurance protection against named storm losses across the US, including Florida, and their attachment points are in range of a gross loss as high as we suggested it could be above.
The 2021-1 cat bond notes attached as low as $550 million at their issuance, while the 2021-2 Class B notes attached at $1 billion.
However, these cat bonds are not currently marked down in the secondary market, at least not far enough to suggest investors consider them at-risk of loss from hurricane Ian.
So, it will be interesting to see whether that changes now Liberty Mutual’s announcement of losses from hurricane Ian has been made, or whether the effective attachment point is actually higher due to inuring reinsurance layers within the tower helping to protect the cat bonds from losses due to this storm event.