Published On: Mon, Oct 16th, 2017

Nagico expects losses of $425 to $500 Million from Hurricanes Irma and Maria

NagicoWILLEMSTAD, PHILIPSBURG - Caribbean insurer Nagico has more than enough reinsurance in place to cover its losses from hurricanes Irma and Maria, its chairman has said.

Nagico has notified its excess-of-loss reinsurers of an expected loss of $325mn-$400mn from Irma and is expecting a gross loss of around $100mn from Maria.

However, its chairman Imran McSood Amjad told The Insurance Insider that concern in some quarters that it could go through the top of its reinsurance on Irma was misplaced.

"We are confident, as are the regulators, that the impact on Nagico's financials will not be as massive as people might expect and that our reinsurance coverage is sufficient. We will be able to look after all our clients with room to spare."

He added: "Nagico has placed reinsurance based on RMS modelling and we are 200 percent confident that we are well covered."

Irma ripped through the Caribbean, making landfall in Barbuda with winds of more than 150mph. It passed over St Martin and St Maarten and caused massive devastation before it struck the [British] Virgin Islands.

RMS has estimated losses in the Caribbean from the event at $10bn-$20bn, while AIR Worldwide has pegged the losses at $7bn-$15bn.

Sources have said that Nagico has over $2.5bn of total insured values on St Maarten and the Virgin Islands.

Nagico's chairman also said that he believed that the industry losses were not as high as some feared, and that damage factors of 50 percent for Dutch St Martin, where the insurer is headquartered, were overstated.

"I have been personally to visit with our CEO virtually every major insured on the island," he said. "We have been there and we've seen the damage."

The Insurance Insider reported yesterday that fears had been mounting in the sector that the insurer, which has dominant market share in the Dutch Caribbean, would exhaust its reinsurance, which was believed to include an excess-of-loss tower as well as a 50 percent quota share.

Amjad confirmed that there was a 50 percent quota share in place with 50 percent owner Peak Re that had a low cap for catastrophes, which meant that the Hong Kong reinsurer's direct exposure to the losses would be "minimal".

The net account is protected by an excess-of-loss tower led by Swiss Re, which Amjad said is "substantially" more than the $400mn reported.

In addition to this heavily impacted cover, Amjad said that Nagico purchases facultative reinsurance.

"It is not on everything, but we buy it on quite a few [accounts]," he said.

The executive continued that Nagico also had an unlimited quota share for all of its cat exposure on French St Martin, and noted that the carrier had put windstorm caps on some of its policies.

"We have one risk, for example, where the sum insured is over $200mn, but the [windstorm] cap is $10mn," he told this publication.

The Nagico chairman went on to explain that the firm had a net retention of $2.5mn for Irma and $2.5mn for Maria, against a capital base of around $100mn.

Nagico, which has a B++ financial strength rating from AM Best, wrote $146mn of business across two entities in 2016, according to credit reports from the ratings agency.

AM Best said that St. Maarten/Curacao/Bonaire accounted for 27 percent of gross written premium across the group, which is equivalent to $39mn.

It added that 14 percent of premiums were sourced from the British Virgin Islands - representing $20mn

A range of Caribbean insurers have bought third and fourth event protections from reinsurers following Irma and Maria.

Amjad said that Nagico was talking to its brokers about buying additional cover, but already had reinsurance in place to cover a third event.

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