PCS puts Typhoon Jebi at $10bn, loss creep may continue: Johansmeyer

Typhoon Jebi is estimated to have caused an insurance industry loss of $10 billion by Property Claim Services (PCS), with the potential for further loss creep apparent, according to Tom Johansmeyer, Co-Head PCS.

PCS recently expanded its range of insurance and reinsurance market loss data aggregation and index reporting services to include non-marine catastrophe losses in Japan, after seeing demand from its client base for the service.

The company immediately began tracking the 2018 Japanese catastrophe events, so including typhoon Jebi which became the largest insurance and reinsurance market loss from the Japan typhoon peril.

Now, PCS has told Artemis that its industry loss estimate for typhoon Jebi has now reached $10 billion, based on aggregated claims data collected from insurers.

Speaking to Artemis, Johansmeyer explained, “In our debut estimate for Jebi under PCS Japan, we posted an estimate of US$10 billion. While we don’t have any prior estimates to show development before our launch of the only independent industry loss index for Japan, I can tell you that we saw various estimates come into the team throughout the development of PCS Japan – and thus we did get a look at some of the early loss development of the event.

“Early estimates came in at around US$8.5 billion, and we did see that move to US$9 billion fairly quickly. However, that may have had as much to do with the product development process as it did with any underlying loss activity.”

Just last week insurance and reinsurance group Sirius International’s CFO said that after experiencing further loss creep from the typhoon, his company believes the “market loss for Jebi is now in excess of $10 billion.”

That’s more than double the early estimates put out by risk modelling companies, clearly reflecting the complexity of the typhoon Jebi loss that has made estimating its losses much more difficult and resulted in the need for even some of the largest reinsurance firms to harden their reserves for the storm.

Johansmeyer agreed, saying that loss creep could remain an issue with typhoon Jebi, “We’re leaving the catastrophe open, as we understand that the loss could continue to creep, particularly because of demand surge and further erosion due to business interruption.”

Further loss creep will not be welcomed by reinsurance, retrocession and also any ILS capacity providers that are exposed to Jebi still.

PCS’ new industry loss estimates for Japanese property catastrophe events are likely to become well-used by the market, both for insight into how loss events develop and as a trigger for industry loss triggered risk trading.

Johansmeyer told Artemis that he is already seeing demand from both traditional and alternative reinsurance clients.

“Because of the creep and complexity the market is seeing with Jebi, there has been steady interest in trading ILWs on PCS Japan, with some capacity providers even taking steps to secure access prior to the official launch.

“At this point, we have several ILS funds registering for access already, with a few other companies already set up. And we’re aware of a few serious efforts to complete ILWs in the works,” he explained.

Typhoon Jebi’s industry loss hitting $10 billion, from initial estimates that were sometimes as low as $3 billion or so, just shows how a complex catastrophe loss event can suffer significant loss creep resulting in increasing hits to reinsurance and retrocessional capital providers.

So it’s no surprise PCS saw demand for a Japanese catastrophe loss estimate product.

“When our clients reached out to PCS to solve this problem for them – i.e., to create an independent industry loss index for Japan – we could sense the urgency. And it seems that the need was significant,” Johansmeyer said.