Reinsurance industry set for profitability in Q1 after limited cat losses

Global reinsurers will likely be reporting “solid underwriting profitability” for the first three months of the year, as catastrophe losses were low, Fitch Ratings said Tuesday.

The agency said that reinsurers’ results will be in line with 2013, since the industry hasn’t seen a significant loss since Hurricane Sandy in late 2012.

While flooding and winter storms did occur in the United Kingdom during the first quarter, and the United States experienced winter storms, Fitch said losses from those events will be “manageable” for the reinsurance industry, “especially as the most exposed firms are typically large, well-diversified operators with the ability to offset losses through other profitable lines and strong capital.”

That’s despite winter 2014 possibly ranking among the top five in U.S. winter-storm insured losses since 1980, Fitch noted, citing an estimate from the Insurance Information Institute.

“Reinsurers will only have to shoulder a minority of the losses, as these events were not costly enough to trigger insurers’ excess of loss property catastrophe reinsurance treaties,” Fitch said.

“Losses for reinsurers will generally be limited to facultative, per risk and pro rata quota share reinsurance treaties. In the case of the U.S., this was partly due to increased retentions by primary insurance companies over the last few years, as improved capital positions have allowed insurers to retain more risk.”