SCOR benefits from positive hurricane Ian loss development – Artemis.bm
SCOR has reported a significant -7.2 point benefit to its combined ratio due to positive development of prior year catastrophe reserves, with hurricane Ian seen as the main contributor, helping the company report an 85% combined ratio for the full year 2023.
We understand that SCOR’s lowering of its loss estimate for hurricane Ian has had a positive effect for some retrocessionaires, reducing their expectation of losses linked to the company.
This positive catastrophe loss development came through in the fourth-quarter of 2023, a period that saw a number of major players reducing their hurricane Ian loss estimates.
Which has ultimately had a positive knock-on effect for some insurance-linked securities (ILS) funds and collateralised reinsurance or retrocession structures during the period.
For some ILS players, a portion of the hurricane Ian loss was able to be unlocked at the end of 2023, putting them in a better position for trading forward at the January renewals.
SCOR is one of the first to provide visibility of the approximate quantum of the positive reserve development for the company, which is evident in its -7.2 point benefit to the combined ratio.
SCOR’s P&C insurance and reinsurance combined ratio was just 75.6% in Q4 2023, which the company said was driven by a lower-than-expected natural catastrophe claims ratio of 1.5% and the positive developments in mature natural catastrophe claims accounting for -7.2 points, which were mainly hurricane Ian driven.
Those positive movements aside, SCOR said that its catastrophe loss ratio for Q4 2023 was better than expected at 8.7%.
Under its insurance services result, SCOR said it had a positive experience variance of EUR 64 million, which was primarily driven by positive development of mature natural catastrophe losses.
So, it seems safe to assume that the majority of that positive experience variance was related to the reduction in SCOR hurricane Ian estimate of ultimate net losses, which will have driven benefits to its retrocessionaires, we suspect, in terms of their expectation of SCOR’s ultimate recoveries.
Of course, a reduction in SCOR’s estimate of losses from hurricane Ian will also be of benefit to its quota share and reinsurance sidecar partners as well.
For the full-year, SCOR’s P&C combined ratio came out at just 85% in 2023, down from 114.9% a year earlier.
Finally, SCOR also laid out an appetite to keep growing into the harder P&C reinsurance market this morning.
Fabrice Brégier, Chairman of SCOR’s Board of Directors, said, “SCOR intends to fully benefit from the most supportive P&C market environment of the past two decades.”
While Thierry Léger, Chief Executive Officer of SCOR, commented, “Looking ahead, our objective is to continue to grow in selected lines of business, as we did at the 1.1.2024 renewals.”
Positive development of hurricane Ian losses has been a trend that benefited some ILS funds and third-party capital partners through the end of 2023 and SCOR’s reserve reduction for the catastrophe event may have driven similar.
However, there are some companies that hardened their hurricane Ian reserves, so this experience (of a declining UNL quantum) has not been level across the market.
