Arch Capital Group Ltd’s third-quarter results were decimated by losses related to Hurricane Ian, as the Pembroke, Bermuda-based insurer and reinsurer reported a 98.2% drop in net profit to $6.9 million.
On the company’s earnings call Thursday, François Morin, Arch’s chief financial officer and treasurer, referred to the company’s Oct. 19 loss bulletin that estimated Ian’s losses at $530 million to $560 million, which he said were the largest in the company’s history.
Arch’s third-quarter total expense ratio deteriorated 5.9 basis points to 97.3% as catastrophe losses took their toll.
Net investment income increased 49.9% to $128.6 million.
In the insurance segment, net premium income increased by 18.63% to $1.37 billion. Net premium income in the reinsurance segment increased by 73.62% to $1.08 billion.
Catastrophe activity in the third quarter has “significantly” increased pressure on property/casualty markets, which could have ripple effects across all property/casualty lines approaching renewals in 2023, Arch CEO Marc Grandisson said on the earnings call.
However, he added that Ian would be a “quarterly earnings event” and not approach any critical capital metrics.
Mr. Grandisson, without providing specific numbers, said Arch would increase its support for cyber coverage as markets have improved as policyholders and insurers have become more vigilant in their efforts to reduce cyber risk.
He also noted that in recent years the property/casualty market has been supported by cheaper alternative capacity such as insurance-linked securities.
Recently, however, investors have started to exit the ILs market as they have seen a decline in performance, which could lead to a capacity crunch in the sector. “There seems to be a lack of players with the ability and willingness to participate,” possibly leading to a “supply shortage,” Mr. Grandisson.