2014 catastrophe frequency increases, insured losses still below avg: PCS

The frequency of catastrophe events recorded in the U.S. and Canada increased during the second-quarter of 2014, but resulting insurance industry losses remain slightly below average, according to Property Claim Services (PCS) Q2 2014 catastrophe report.

The calm continues, PCS says in its report which was published today. After a calm start to the year, with Q1 2014 catastrophe frequency and insured losses coming in below average, the second quarter saw a slight uptick in catastrophe frequency while losses were just below the long-term average.

For the first half of 2014 catastrophe losses are now consistent with the ten-year average, according to PCS. For Q2 2014 the level of insured losses from catastrophes in the U.S. reached $6.5 billion, the lowest since 2010, while catastrophe frequency was consistent with the average the level of losses was around 5% below average.

Canada, where PCS also designates and reports on catastrophe events, saw a similar trend. Catastrophe losses for Canada remain well below average in 2014, down 98% for the first half from 2013. However, there is one more loss event to include which PCS will be publishing an estimate later in July.

In the first-half of 2014 PCS designated 20 catastrophe events, which resulted in $9.5 billion of insurance industry losses. The frequency of catastrophe events was slightly above the long-term average of 18.6 events but the insured losses were just below the average of $9.7 billion.

Nine of the events in the first-half of the year remain open to resurveys by PCS, meaning that loss estimates could rise. 10% of the total catastrophe loss was due to two events in the last week of June, which will almost certainly mean an increase in the insured loss total taking it nearer to, or even above the average.

H1 2014 U.S. Catastrophe activity and insured losses - Source: PCS

36 U.S. states were affected by catastrophe activity in the first-half of 2014, with Texas seeing the most insured losses at $1.8 billion, followed by Illinois and Pennsylvania with $737m and $677m, respectively. Texas, Illinois, and Nebraska led the totals for second-quarter catastrophe losses at $1.4 billion, $569m, and $459m. Oklahoma, historically considered the most catastrophe-prone state in the U.S. in both frequency and severity, did not feature in the ten most impacted states in the first half of 2014.

Personal losses accounted for 63% or $6 billion of the H1 total, followed by auto losses at 20% and commercial losses at 17%. The impact of hail events on auto losses is clear, as in the first-quarter auto losses were only 2% of the total, with most being personal and caused by the polar vortex. Now, after the second-quarter auto insurance lines shows their exposure to hail storm events.

U.S. catastrophe insured losses by line of business - Source: PCS

13 catastrophe events were designated in Q2 2014 by PCS, all being wind and thunderstorm related events, resulting in the $6.5 billion of losses. That is a 10% decline from the $7.2 billion of losses suffered in Q2 2013. Catastrophe frequency was above the long-term average of 11.6 events, while insured losses were 12% below the average.

Q2 2014 catastrophe activity and insured losses - Source: PCS

All 13 of the second-quarter catastrophe events included wind, hail and flood and 9 events included tornadoes. The largest event of the quarter, a mid-May wind and thunderstorm event, caused more than $1.5 billion of losses across 11 states.

Three events so far this year have seen losses of over $1 billion, with another seven exceeding PCS’ resurvey level of $250m.

With just 2 catastrophe events affecting Canada in Q2, after a quiet Q1 which so no designated Canadian catastrophes, it’s no surprise to see losses well below average for the country. Losses are down significantly, although frequency was around average.

PCS’ Q2 2014 catastrophe report contains more details and analysis of the activity and insured losses suffered during the quarter and the first-half of the year. You can download a copy of the full report via the PCS website.