Fidelis Insurance Holdings Reports Adverse Developments in Aviation and Aerospace
In a recent loss update preceding its Q4 and full-year earnings announcement for 2024, specialty insurer Fidelis Insurance Holdings Limited has disclosed a significant net adverse prior year development amounting to $287.2 million within its Aviation and Aerospace sector. This development has notably influenced the company’s performance during both periods.
Fidelis attributes the adverse reserve development to the business underwritten during the 2021 and 2022 underwriting years, which has been significantly affected by aviation litigation stemming from Russia’s ongoing invasion of Ukraine. As a direct consequence, the global specialty insurer now anticipates reporting a net income ranging between $100 million and $120 million for the full year 2024, alongside an operating income forecast of $120 million to $140 million for the same period.
Based in Bermuda, the insurer has taken a cautious approach by judiciously settling claims to mitigate its overall exposure to the aviation litigation risks. Fidelis noted that one of the key reasons for strengthening its reserves is to facilitate ongoing settlement discussions while also accounting for recent developments and new information that has come to light. To date, Fidelis has either successfully settled or is actively engaged in various stages of settlement discussions concerning approximately two-thirds of the total exposure related to lessor policy claims currently involved in litigation.
Among the remaining claims in litigation, a substantial portion is linked to the English trial that commenced in October of last year. The company continues to maintain reserves based on a probabilistic model that assesses potential court outcomes, taking into consideration recent developments and updated information received. The English trial concluded on February 14th, 2025, with a court judgment expected to be rendered in the upcoming months.
Dan Burrows, the Group Chief Executive Officer, commented on the situation: “We have significantly reduced our overall exposure to the intricate and evolving Russia-Ukraine aviation litigation, thereby lowering the potential downside risk associated with this event and enhancing certainty for our shareholders. Excluding the impact of the prior year development linked to our Aviation and Aerospace line of business, our full-year results would have surpassed our long-term Operating ROAE target. Our balance sheet remains robust, and our business is strategically positioned to support future growth and deliver sustained value for our shareholders.”
In a separate update, Fidelis has provided a preliminary estimate of catastrophe losses resulting from the January 2025 California wildfires, which are projected to be between $160 million and $190 million, net of anticipated reinsurance recoveries, reinstatement premiums, and tax implications. The company confirmed that these losses will be reflected in its first quarter 2025 earnings report, and the disclosed range is based on an estimated insured industry loss of between $40 billion and $50 billion.
Source: Reinsurance News
