It is “pretty certain” the August 4 explosion in Lebanon’s capital Beirut will be “a major loss” for Hannover Rück SE, S&P Global reports, quoting the reinsurer’s property and casualty head Sven Althoff.
According to S&P, Hannover Re classified major losses as those generating claims of more than €10m ($A16.5m), gross of retrocession.
Althoff said it was “impossible for me to comment right now” on whether the loss to the reinsurer would be in the low double-digit, high double-digit or even triple-digit millions of euros.
According to the latest media reports, the big explosion that devastated Beirut’s port killed about 135 people and injured 5,000, while up to 300,000 people’s homes were damaged. Lebanese officials have attributed the explosion to 2,750 tonnes of unsafely stored ammonium nitrate, according to the BBC.
Answering an analyst’s question about the blast on a call for Hannover Re’s earnings for 1H of calendar 2020, Althoff said the impact on infrastructure would be “massive.”
He said it was too early to determine the insurance penetration in the affected area, because the blast hit an industrialised harbor area, but “we have to assume there is a good level of penetration here, so from that point of view, I guess you will see this on our major loss list on 3Q20”. Althoff said the company was “very, very sorry to see this tragedy happening “.
Hannover Re reported a 72.5% drop in 2Q20 net profit on 2Q19, to €101.5m. That was mainly because of a €380m reserve for covid-19-related property and casualty (P&C) claims, taking the total coronavirus reserve booked for 1H20, to €600m.
Althoff said of the €600m, 40% was for business interruption (BI) ; 25% for credit and surety; 20% for event cancellation and contingency; and the remaining 15% for other business, including travel and engineering.
About 80% of the reserve was for incurred-but-not-reported (IBNR) claims. Hannover Re CEO Jean-Jacques Henchoz told analysts the high IBNR level factored into the €600m P&C reserve “could bring us a lot closer to our final estimate for the covid-19 impact”.
One uncertainty was court battles over denied covid-19 BI claims. Althoff said the €240m BI portion of the reserve assumed no retroactive change to coverage in the US, but took a “balanced view” on court cases in Europe and elsewhere.
Henchoz said if all the cases should go against insurers, the €240m number would not be enough. “If insurers should win all cases, … the €240m would be a prudent number.”
On the life and health side (L&H), Hannover Re had booked coronavirus-related losses of €63m for 1H20, of which a little more than 50% was for the US.
L&H head Klaus Mill said L&H coronavirus claims could be “slightly higher” in 2H20 than 1H20, but that depended on whether the US “starts managing the pandemic or not”.