December global catastrophe insured losses likely over $4.2bn: Aon

by Artemis on January 6, 2016

The significant winter storm events in the UK and U.S. have contributed to one of the largest single month catastrophe insurance and reinsurance loss bills in recent times, with December set to see an insurance bill of at least $4 billion.

Flooding image from the BBCImpact Forecasting, reinsurance broker Aon Benfield’s catastrophe model development team, said that the recent record flooding and violent tornadoes in the U.S., as well as windstorm damage and some of the worst flooding since 2007 in the UK, would make December an expensive month for insurance and reinsurance players.

Impact Forecasting’s December Catastrophe Recap report details the complex weather pattern which struck multiple regions of the United States, killing at least 64 people. Across the Midwest, Plains, Southeast, Rockies and Northeast inclement weather impacted widely, though the states of Missouri, Texas, Illinois, Arkansas, Oklahoma, Mississippi, Tennessee, Alabama, Kentucky and Indiana were among the hardest-hit.

The report suggests that preliminary estimates show total economic losses from the U.S. severe weather events, which saw at least 58 tornado touch-downs, historic flooding in the Mississippi Valley and Midwest, and record snowfall and ice, as well as hail and damaging winds, during December will exceed $4.0 billion, with insured losses likely to approach or exceed $2.0 billion. The Insurance Council of Texas reported losses of $1.2 billion in the Dallas metropolitan region alone.

Meanwhile in Europe, windstorms Ted and Eckard – known locally as Desmond and Frank – brought even more flooding and wind damage with the UK hardest hit. A large area of southern Scotland, northern England, and Wales, saw thousands of homes endured varying levels of flood inundation.

Impact Forecasting cites the preliminary insured loss estimates for the UK of over £1.5 billion ($2.2 billion), while overall economic losses were forecast to be around £2.8 billion ($4.0 billion).

So just the U.S. severe weather, at a preliminary insured loss estimate of $2 billion and the UK flooding and storms, with a preliminary insured loss estimate of over $2.2 billion, show that global catastrophe and severe weather losses for December 2015 are set to exceed $4.2 billion and likely by quite a way once all claims are in.

It’s the largest single monthly toll for the insurance and reinsurance industry for a while, particularly an estimate this close to the end of the month, showing the danger of becoming complacent as recent levels of catastrophe loss have been lower.

The total is sure to rise further, given the ongoing nature of the flooding in the UK particularly, where some regions were flooded repeatedly and waters are only now subsiding. December weather globally has perhaps provided a reminder to the insurance and reinsurance industry that there are claims to pay.

For ILS fund managers there is without doubt a potential for some claims to be paid as a result of these events, particularly through quota shares, private ILS deals and sidecar type investments. However, at these loss levels any impact is still expected to be minimal to ILS funds.

Other global catastrophe losses of note (which all add to the insured loss tally) included:

  • Areas of Argentina, Paraguay, Uruguay and Brazil endured their worst flooding in at least 50 years, which killed at least 16 people and resulted in preliminary economic loss estimates in excess of USD200 million.
  • Typhoon Melor made multiple landfalls in the Philippines, killing at least 42 people and injuring 24 others. The Philippines’ National Disaster Risk Reduction and Management Center reported economic damages to agriculture and infrastructure alone at PHP6.5 billion (USD140 million).
  • A wildfire in the Australian state of Victoria destroyed at least 116 homes. The Insurance Council of Australia declared an insurance catastrophe, with preliminary insured losses listed at AUD53 million (USD38 million), and total economic losses expected to exceed USD100 million.
  • The Ethiopian National Risk Management Coordination Commission announced that it sought USD1.4 billion to deal with its worst drought in 30 years. At least 10 million people were affected.

Also read:

UK storm & flood loss could near £2.5bn ($3.7bn), hours clause a factor.

UK storms Desmond & Eva loss estimate up to £1.2bn ($1.8bn): PwC.

UK flood loss estimates rise to £1.5bn, Flood Re expansion called for.

UK flood insurance industry losses could hit £1bn ($1.5bn): PwC.

Storm Desmond & UK floods likely a £520m re/insurance loss: ABI.

UK storm Desmond expected to cost insurers up to £325m: PwC.

PERILS puts Cumbria, UK flooding under investigation.

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