AlpenAegis Re said on Friday that an external audit found its catastrophe models had understated potential claims from Pacific wind and flood cover by CHF 1.15 billion (about €1.2 billion). The Zurich-based company suspended its dividend, began emergency talks with lenders and said it would raise capital before publishing full-year results.
The review examined 2023-25 contracts covering property, ports and utilities across the Pacific. Auditors found that a modelling system had counted some risk-reduction payments twice, making the firm’s exposure appear smaller; the company said it had no evidence of deliberate wrongdoing and had referred the findings to Swiss insurance supervisors.
A costly modelling error
The shortfall is more than a third of AlpenAegis’s reported capital buffer. Its solvency ratio, a measure of resources available to meet claims, is now estimated at 118%, below the 130% level required under its main lending agreements. The company said it had not yet missed a payment or claim.
Chief executive Michelle Morelli-D'angelo said the company would offer lenders a restructuring plan within 10 days and seek a capital injection of up to CHF 800 million. “We priced protection using a picture of risk that was wrong. Our first duty now is to make sure every valid claim can be paid,” she said.
We priced protection using a picture of risk that was wrong.
Michelle Morelli-D'angelo, chief executive
The audit was commissioned in July after a routine comparison of the firm’s model outputs produced two different estimates for the same set of coastal policies. AlpenAegis said it had since frozen new business in three Pacific markets, while existing customers would remain covered under their contracts.
Storm pressure builds
The announcement landed as Typhoon Kaimana moved across the western Pacific, where forecasters said it could strengthen before reaching a chain of islands on Sunday. Wind gusts were forecast to reach 290 km/h (180 mph); the storm has not yet caused claims against AlpenAegis, and the company said it could not predict its eventual losses.
Lotta E. Salo, an insurance analyst at Geneva-based Veyron Advisory, said the audit would make other reinsurers scrutinise how they modelled extreme storms. “The immediate issue is not whether this one storm hits the insured sites. It is whether the same accounting flaw sits inside other contracts,” she said.
AlpenAegis shares fell 27% in early trading before the Swiss stock exchange paused dealings at the company’s request. About 1,400 staff work for the group, which said salaries and customer payments were unaffected; its largest shareholders are due to meet the board in Zurich on Monday.
The firm expects to complete a second review of its Pacific contracts by 30 November and publish revised figures before year-end. Swiss supervisors have asked for weekly updates, while lenders are weighing whether to extend a CHF 420 million credit facility that comes up for renewal in December.
