13 December 2012News

CATCo sets up retrocessional loss reserve for Sandy

Bermuda-based reinsurance-linked investment manager CATCo Re has established a retrocessional reinsurance loss reserve for losses related to Sandy. In the face of uncertainty in the industry, the directors have been cautious in their estimate, including a reserve provision of $20 billion.

The company said the amount is subject to change as the impact of Sandy and associated costs become clearer. To arrive at the $20 billion figure, investment managers modelled the projected loss distribution through CATCo Re’s 2012 portfolio, relying on industry loss estimates from PCS and expected industry insured losses suggested by Eqecat, AIR Worldwide and RMS.

Such a reinsurance loss reserve could reduce the fund’s gross expected returns by up to 13.2 percent. The fund was originally anticipating gross expected returns of 20 percent for 2012.

CATCo’s announcement came on the same day another Bermuda player, Montpelier Re, announced its estimated losses from Sandy to be around $95 million. ACE Group estimates losses of $380 million, although both estimates echo the uncertainty expressed by the industry as a whole.