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Swiss Re faces $500m of Ukraine war losses

Reinsurer could be hit with a similar bill to Munich Re, analysts at Jefferies have calculated

Swiss Re is facing reinsured claims from the war in the Ukraine of around $500m, analysts said. 

The estimate from Jefferies is based on a reinsurance industry loss of $5bn, with Swiss Re taking a market share of 10%. 

Jefferies said the cost would be spread over the first half of 2022, given US GAAP accounting requirements which means claims can only be booked when reported, or where there is sufficient information to confirm a loss.

The loss estimate for Swiss Re is broadly in line with with analysts' €500m estimate for Munich Re

“By way of comparison, this is marginally more optimistic than Swiss Re’s implied opinion of $750m, being 10% share of a $15bn industry loss, with 50% reinsured," the Jefferies analysts said. 

The analysts also assessed Swiss Re's natural catastrophe losses, which for the year to date are above average due to business mix. Although globally the analysts expect that natural catastrophe losses were broadly in line with the long-term average, Swiss Re has an outsized market share in regions experiencing losses.

For example, it has an above-average share in Europe (winter storms cost $3bn to $6bn), Australia (floods cost $2bn to $3bn), and Japan (the earthquake costs $2bn to $4bn).

Jefferies estimates the total industry loss is $12bn, where Swiss Re has a 5% share, implying $600m of claims - some $280m above budget.

The analysts also warned that Swiss Re’s pandemic claims could be worse than expected.

In Swiss Re’s life and health reinsurance business, despite the disappointing guidance from full year 2021 results, claims could be higher than expected.

In the second half of 2021, Swiss Re incurred $450m of additional mortality claims per quarter for 165,000 excess deaths, which when applied to the first quarter 2022 excess deaths of 200,000, implies $545m of claims. 

Jefferies' model presumes that $550m is incurred in the first half of 2022, or 85% of management’s full-year 2022 guidance, leaving just $100m (15%) for the second half of the year. As a result, there is a risk that the guidance will be exceeded, the analysts said. 

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