2018 nat cat losses deliver costliest back-to-back years for insurers

Insured nat cat losses were relatively high in 2018 as a series of events took their toll and helped deliver the costliest back-to-back years for insurers ever, according to analysis from reinsurers and brokers. Swiss Re estimates that global insured catastrophe losses totalled $79bn last year, the fourth highest it has recorded and above its ten-year average of $71bn. Natural catastrophes accounted for $71bn of 2018’s insured losses, and man-made disasters the remaining $8bn, said the reinsurer. Man-made climate change events, in particular wildfires, pushed 2018 insured losses beyond the long-term average to $80bn, Munich Re said on releasing cat loss statistics for the year. The $80bn figure is well down on 2017’s record $140bn figure, but double the 30-year average of $41bn, pointed out the reinsurer. A large number of midsized natural catastrophes drove 2018 insurance losses to $71.5bn, the third highest in the past eight years and above the annual average of $65.5bn since 2011, said Willis Re in its annual nat cat review. Private and government-backed insured nat cat losses of $90bn last year were the fourth highest on record, with 2017 and 2018 proving the most costly ever back-to-back years for insurers, according to Aon figures. Vaughn Jensen, executive vice-president and head of North America catastrophe analytics at Willis Re, noted that insurers and reinsurers have absorbed more than $200bn of nat cat losses during the past two years. Overall losses from global natural catastrophes totalled $160bn in 2018, according to Munich Re. Its big rival Swiss Re puts total losses from natural and man-made disasters at $155bn, down from £350bn in 2017. Last year’s costliest event was California’s Camp Fire, with Munich Re’s insured losses figure for the event as high as $12.5bn. The reinsurer said insured losses from all wildfires in California last year, including $4bn from the Woolsey Fire in Los Angeles, will likely total $18bn. Willis Re said all wildfires in the state caused losses of between $15bn and $17bnThe US also recorded the second costliest event of 2018 when Hurricane Michael delivered insured losses of up to $10bn, according to Munich Re. Hurricane Florence, which mainly caused flood damage, recorded lower insured losses at $5bn, although economic damages were similar to Hurricane Michael at $14bn, added the reinsurer. At a cost of $2.1bn, Windstorm Friederike was the only European weather event in the top ten global insured losses, said Aon. In Europe, agricultural losses and wildfires caused by sustained drought recorded the continent’s costliest event with total losses of $3.9bn, said Munich Re, although only a small amount was insured at about $280m. The reinsurer said many European countries were without rain for several months during the hot, dry summer of 2018. As well as affecting agricultural crops, rivers ran too low to carry goods, catching out some companies uninsured against the impact of weather fluctuations. In Japan, Typhoon Jebi is estimated to cost insurers $8.5bn, according to Willis Re numbers. It noted that Latin America and the Caribbean came through 2018 without any single major insured loss from nat cats. Willis Re said 2018 was “unusual” because a series of smaller catastrophes, rather than one large event, pushed the insured total above average. Karl Jones, managing director and head of international catastrophe analytics at the broker, said: “The industry experienced a large number of midsized natural catastrophes. Three events – the Camp Fire, Typhoon Jebi and Hurricane Michael – have all reached at least the high single-digit billions in insured losses, but only the Camp Fire seems likely to exceed the level of $10bn. However, a large number of smaller, billion-dollar losses, principally storms, have added up to make 2018 a costly catastrophe year. With the exception of the major California wildfires, these losses are well within modelled expectations.” Swiss Re added that there was not a singular major natural catastrophe in 2018, but aggregated losses from a number of smaller and mid-sized events, alongside some major man-made disasters, have caused “sizeable” overall insured losses. Munich Re said climate change was behind some of last year’s losses. “There are clear indications of the influence that man-made climate change has had on devastating wildfires in California, which, like last year, again caused billions in losses in 2018,” it said. Board member Torsten Jeworrek said the link between wildfires and climate change is clear. “Action is urgently needed on building codes and land use to help prevent losses. Given the greater frequency of unusual loss events and the possible links between them, insurers need to examine whether the events of 2018 were already on their models’ radar or whether they need to realign their risk management and underwriting strategies,” he said. Ernst Rauch, head of climate and geosciences at Munich Re, said: “We have experienced a significant increase in hot, dry summers, which has been a major factor in the formation of wildfires. Many scientists see a link between these developments and advancing climate change. This is compounded by man-made factors such as burgeoning settlements in areas close to forests at risk from wildfire.” Steve Bowen, director and meteorologist at Aon’s Impact Forecasting, said catastrophe risk continues to evolve. He said the complex combination of socioeconomics, shifts in population and exposure to vulnerable locations, plus a changing climate contributing to more volatile weather patterns, is “forcing new conversations to sufficiently handle the need for mitigation and resilience measures”. Munich Re reported 10,400 deaths from natural catastrophe events in 2018. This is one fifth of its 53,000 30-year average. This compares with Swiss Re’s figure of 11,000 people who died or went missing in catastrophe events during 2018.

2018 nat cat losses deliver costliest back-to-back years for insurers

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