Arch estimates cat losses for Q2 of up to $225m
Arch Capital Group has established a range of pre-tax catastrophe losses of $205 million to $225 million for Q2 2020, across its property casualty insurance and reinsurance segments.
The estimate is net of reinsurance recoveries and reinstatement premiums. It includes an estimated range of $170 million to $180 million for its exposure to COVID-19 global pandemic claims, and an estimated range of $35 million to $45 million for losses related to civil unrest claims across the US and other 2020 second quarter catastrophic events.
These estimates are in addition to the estimated $87 million exposure Arch previously disclosed in its quarterly report for Q1 2020, and relate to the company’s insurance and reinsurance segments only.
Arch emphasised the large degree of uncertainty around making these predictions. Actual, realised losses could end up being significantly different from the estimates, it warned.
The COVID-19 pandemic leads to direct and indirect impacts on the business, most notably observed in its mortgage segment in the form of elevated delinquency rates and potentially higher loss experience.
For US primary mortgage insurance, loss reserving under GAAP is based on reported delinquency rates. Segregating estimated losses due to the pandemic from the overall mortgage segment estimated losses would require knowledge of the number of delinquencies specifically attributable to COVID-19.
As this exercise cannot be performed accurately, the Company will not report COVID-19 provisions separately from overall mortgage insurance loss provisions. Instead, it will report on the mortgage segment results when it releases 2020 Q2 results, currently scheduled for July 29.
