Arch Capital Group updates 2017 loss estimates

10-01-2018

Arch Capital Group has issued an update of the losses that it recorded in 2017, in the wake of the series of wildfires that burned across many areas of California and a series of smaller catastrophe events occurred around the globe in the fourth quarter of the year.

The company said it has established a range of pre-tax losses of $60 million to $75 million, net of reinsurance recoveries and reinstatement premiums, for these 2017 fourth quarter catastrophic events. This estimated range incorporates and updates the $30 million to $55 million range previously disclosed by the Company in its Quarterly Report on Form 10-Q for the 2017 third quarter. The previous range reflected the first series of California wildfires only (also referred to as the Tubbs fire), whereas this current range reflects the Tubbs Fire, the second series of California wildfires (also referred to as the Thomas Fire) and other catastrophic events from around the globe.

Arch Capital also pointed out that there are still significant uncertainties surrounding the number of claims and scope of damage for both the Tubbs and Thomas Fires, as well as the other global events. Its estimate for these events is based on currently available information derived from modelling techniques, industry assessment of exposure, preliminary claims information obtained from the Company’s clients and brokers to date and a review of in-force contracts. Actual losses from these events may vary materially from the estimates due to the inherent uncertainties in making such determinations.

The company said that it had entered into intercompany loss portfolio transfers (LPTs) effective on December 31, 2017 that transferred approximately $1.35 billion of net retained reserves for losses and allocated loss adjustment expenses between its subsidiaries. Given that these transactions involve two related parties, and in accordance with GAAP, they eliminate in consolidation. These transactions support the Company’s ongoing capital management strategies.

Arch Capital Group, Q4, Cat losses, Reinsurance, Insurance, Hurricanes, Wildfire, US tax changes, Bermuda

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