Catlin hit by worsening loss estimates

Lloyd’s insurer Catlin has estimated its year-to-date catastrophe bill at $670m, up 25% on the $534m estimate it gave at the half-year point.

The company said in its third-quarter interim management statement that the increase was caused by a deterioration in its half-year loss estimates as well as additional catastrophe activity.

Catlin has been hit by three new events in the second half of the year so far: the July flooding in Copenhagen, Hurricane Irene in the US and the continuing Thailand floods.

Catlin did not disclose how much of the increase was attributable to the loss estimate deterioration and how much was caused by the new events.

The $670m estimate includes recoveries of more than $50m from Catlin’s catastrophe aggregate reinsurance protection.

Catlin estimates that 90% of any deterioration of losses from 2011 catastrophe events will be recovered from its catastrophe aggregate reinsurance programme. It also anticipates that it will recover a “substantial proportion” of losses from any additional catastrophe events occurring in 2011, once the deductibles applicable to these events are satisfied.

Despite the rising catastrophe bill, Catlin chief executive Stephen Catlin was upbeat about the effect the heavy 2011 catastrophe burden would have industry-wide.

“We believe that fundamental changes in the marketplace are on the horizon as a result of the series of catastrophe losses, several years of falling rates for many classes of business, the challenging investment environment and the increasing strain on some insurers’ and reinsurers’ balance sheets due to all of these factors,” Catlin said in a statement.

The company reported that it had achieved rate rises of 10.5% in catastrophe-hit business during the third quarter.

Catlin’s gross written premium for the first nine months of 2011 increased 12% to $3.7bn (9M 2010: $3.3bn).

The insurer’s non-London hubs now account for 49% of gross written premiums, compared with 43% at the same point last year. Gross written premiums at the London/UK arm remained static, while the company’s three other territories showed growth.

The most growth was seen in the international division, comprising Asia, Europe and Canada, where gross written premiums increased 59% to $620m (9M 2010: $389m).

The bulk of this growth came from business written in the company’s newly-formed Catlin Re Switzerland operation. However, both the Asia-Pacific and Canada hubs reported growth in gross premiums written exceeding 25%.