Autonomous: European insurers gain from lower than expected cat losses in Q3

Autonomous, the research arm of AllianceBernstein known for its independent analysis of the financial sector, has extended its recent work on reinsurers to examine the impact of this year’s benign catastrophe environment on major European primary insurers.

While the absence of large-scale events provides a more clear-cut advantage to reinsurers, Autonomous notes that the five large composites under its coverage, including Aviva, have still derived meaningful benefits.

Although several convective storms and floods have affected parts of the US and Europe, Autonomous highlights that both the frequency and severity of these events remained contained. This produced varied outcomes across the major groups in the first half of the year.

Allianz was the standout, reporting catastrophe losses equivalent to 1.8% of premiums versus an average of 3%, while Aviva struggled against adverse conditions in Ireland and Canada, resulting in a 1.3% deficit compared with its normalised 4% expectation before the DLG integration. In aggregate, the five primary insurers reported a €1.1bn surplus relative to catastrophe budgets, equating to a one percentage point improvement in combined ratios.

Looking ahead to the third quarter, Autonomous has modelled a scenario where losses reach just 40% of normalised annual expectations before returning to standard levels in the final three months of the year. If this plays out, a further €1.1bn would be added to the sector’s surplus, taking the full-year benefit to over €2.2bn.

Within this framework, AXA emerges as the principal beneficiary, with an estimated €0.4bn gain in Q3, slightly ahead of the €0.35bn advantage calculated for Allianz.

Autonomous concludes that while the reinsurers remain more directly leveraged to the absence of major catastrophes, the supportive environment for primary insurers should not be overlooked.

The scale of the windfall is ultimately subject to management discretion, but it nevertheless provides an additional buffer for companies seeking to deliver on earnings targets and maintain consensus expectations heading into third-quarter reporting.