The fear factor will determine rate hikes
While the industry has enough capital
expected to constitute a material earnings event,
but not a capital event, for most companies.
However, he also noted that select companies
with disproportionate combined losses that
weaken capital could see ratings downgrades if
losses are not addressed through capital raises or
other mitigating actions.
“Within our ratings coverage, global
reinsurers are likely to be the most exposed to
these events. However, some larger diversified
primary insurers in the US and select players
globally are also at risk.
“The greatest threat to ratings would be in cases
where losses materially exceeded a re/insurer’s
modelled estimates, which could indicate some
weaknesses in risk management processes,” he said.
Schneider added that, once the dust has
settled on claims and the market’s reaction to the
losses, the biggest legacy of Harvey might very
well be the protection gap that was revealed in
such a highly developed market.
He noted that RMS estimated $18 to $25
billion of insured losses (excluding National
Flood Insurance Program losses of $7 to $10
billion) for Harvey, which is only a fraction of the
estimated $70 to $90 billion economic loss.
“This is primarily due to Harvey’s being much
more of a flooding event, which has more limited
coverage by private insurers. As a result, it is likely
that the US government will to seek to transfer
more flood risk to the private markets, including
ILS, providing an opportunity for insurers,” he
to handle the losses from the recent
hurricanes, even at the higher end of estimates,
it will be the psychology of the market that will
determine potential changes in rates, with the
fear factor having an important role to play,
Brian Schneider, Fitch Ratings’ global head of
reinsurance, told PCI Today.
“A potentially record year of catastrophe
losses can be absorbed by the very strong levels
of industry capital. However, it has the potential
to change the psychology of the market such
that pricing stabilises and even increases at the
renewals,” Schneider said.
“At a minimum, loss-impacted areas are likely to
see double-digit hardening in pricing. The amount
and length of any potential pricing movement will
depend on how much capital is removed from the
market, including from insurance-linked securities
(ILS), as well as how much fear these hurricane
events create in the market.
“The biggest potential price increase may
be in the retro market, which is expected to
suffer significant losses and is dominated by ILS
Schneider added that much will also depend
on how third party capital reacts to losses. He
noted that the recent catastrophe events will
result in losses to the alternative reinsurance
market and could test the willingness of the ILS
market to pay some claims.
“This will particularly be the case for
collateralised re, which has been largely untested
by a loss event, having grown significantly since
2011,” he said. “Also, collateral will be locked
up beyond year-end as issues are sorted out and
“There is also the question of the ability of the
ILS market to reload into 2018. We expect this to
occur given the amount of capital looking to enter
if ILS rates were to increase. In particular, family
offices and endowment funds have been showing
more immediate interest than pension funds.”
He said that most US insurance companies
and global reinsurers rated by Fitch are not
expected to be downgraded as a result of the
recent catastrophe losses as the events are
Insurtech startup CoverWallet closes new round of funding
Insurtech startup CoverWallet has closed an
$18.5 million series B funding round led by
Foundation Capital with participation from
existing investors Union Square Ventures, Index
Ventures, CV Starr, and Two Sigma Ventures.
The company said it plans to use the new
funding to continue building its core technology,
expand partnerships, and scale operations.
CoverWallet leverages data and technology to
customise and simplify the purchase of insurance
for small businesses.
As part of the funding round, Charles
Moldow, partner at Foundation Capital, joins
John Buttrick from Union Square on the
company’s board of directors.
“We’re thrilled to welcome Foundation
Capital and Charles Moldow to the CoverWallet
family,” said Inaki Berenguer, co-founder and
CEO of CoverWallet.
“They share our assessment of the insurance
industry as being inefficient and unloved by
customers. Not a recipe for success.
“Today, there exists a unique opportunity to
reinvent it by focusing on the CoverWallet principles
“We are on a mission to use
technology to democratise hasslefree
access to business insurance.”
of simplification and transparency, leveraging
analytics, and ultimately reducing friction. We are
on a mission to use technology to democratise
hassle-free access to business insurance.”
Since launching in 2016, CoverWallet has
secured more than $30 million in venture capital
12 | PCI TODAY | DAY 2: Monday October 16 2017 www.intelligentinsurer.com | www.bermudareinsurancemagazine.com