January 25, 2018 / 12:10 PM / a year ago

UPDATE 1-Disasters damage Dutch pension fund PGGM's insurance portfolio

(Adds comment on currency hedges, U.S. disaster reinsurance losses)

By Toby Sterling

AMSTERDAM, Jan 25 (Reuters) - Earthquakes, hurricanes, fires and floods took their toll on the 2017 results of Dutch fund PGGM, which is one one of the world’s largest pension funds and a big player in disaster reinsurance.

PFZW, the fund manager which oversees PGGM’s money, said it had lost 13 percent on its insurance-linked products portfolio before currency hedging, leaving it with 3.84 billion euros in such investments. Insurance products make up about 1.9 percent of its total 197.2 billion euros in assets under management.

“The unusually heavy hurricane season in the United States in the past year and the damages for the insurance industry that flow from that led to a negative result,” in the fund insurance-linked investment category, PFZW said in a statement.

Last year was one of the costliest in history for those who insure against natural disasters.

In an analysis published on Wednesday, Aon Benfield said 2017 had been the second worst year on record for natural disasters, causing a total of $134 billion in damages .

As a result, some reinsurers had been expecting double-digit price rises across the board when the Jan. 1 renewals came around after all of last year’s losses.

In the end, however, global property reinsurance prices rose less than expected, with strong competition limiting increases to single figures.

A PGGM spokesman said the fund had no intention of dropping its investment in insurance linked securities, which offer attractive returns in most years. For 2017 overall, PFZW’s investments saw a 5.1 percent return.

PGGM spokesman Maurice Wilbrink said that the impact on overall returns on its insurance portfolio were actually lower than the headline figure because most of its insurance assets are denominated in dollars or other currencies that weakened against the euro — and it had hedges in place.

Wilbrink estimated that currency effects accounted for 11 percentage points of the 13 percent loss at insurance.

“Therefore, out of the return of around -13 percent reported over 2017, the contribution of the 2017 catastrophes was (only) approximately -2 percent” he said in an email. (Reporting by Toby Sterling; Editing by Keith Weir and Alexander Smith)

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