American International Group expects a $2 billion hit in the third quarter from a trio of major hurricanes in the Americas and a catastrophic Mexican quake, the insurer said Monday. The company said its estimates are "preliminary and dependent on broad assumptions about coverage, liability and reinsurance".
XL's estimate of losses from Hurricanes Harvey, Irma and Maria is put at $1.33 billion, while its total third-quarter 2017 catastrophe loss bill will be nearer to $1.48 billion.
The company, which has niche products including casualty and property reinsurance, said it expects to report pretax underwriting losses of $503 million, net of reinstatement premiums, in its third quarter results scheduled to be reported on October 25.
AIG estimated the impact after taxes at $1.9 to $2.0 billion.
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The estimates are based on a combination of catastrophe modeling, exposure analysis and preliminary ground-up notifications and are consistent with private insured market loss estimates for the three hurricanes in the range of $75 billion to $90 billion.
Chubb Ltd, the world's largest listed property and casualty insurer, has estimated after-tax losses of up to $1.28 billion from hurricanes Harvey and Irma.
The estimated losses are approximately evenly split between XL Group's insurance and reinsurance segments.
The company says it continues to have significant catastrophe reinsurance protections remaining for 2017 and 2018, including catastrophe bond protections, some of which extend through 2019.
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XL's CEO Mike McGavick said: "The problem of underinsurance is again laid bare, afflicting especially those already less well off".
Morgan Stanley said in a research update that XL's losses were roughly in line with expectations. Additionally, the ILS fund operations of XL Group, New Ocean Capital Management, will also be facing losses from its collateralized participation in affected reinsurance programs, possibly including XL's own losses.
The firm states that the estimate is net of reinstatement premiums, and is based on claims received to date, and industry loss estimates, from both the industry and proprietary models.
Commenting on today's announcement, XL's Chief Executive Officer Mike McGavick said: "Our hearts break at the havoc caused by these events; the bad pain and anguish suffered".
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