2010 is turning into a year of large losses for the re/insurance industry. Frequency of events this year has been extremely high and in the first nine months of the year Munich Re have recorded 725 weather-related natural hazard events, the second highest figure for the January to September period recorded since 1980.
During this nine month period Munich Re have recorded total economic losses of $65b and insured losses of $18b. With three months of the year to go and the remainder of the Atlantic hurricane season to play out that number is likely to rise quite significantly before year-end.
Munich Re suggests that we are seeing an increase in incidence of certain loss events due to climate change. They say that the incidence of flood loss events has tripled since 1980 and windstorm event incidence has doubled in that time. Munich Re put the rise in losses down to socio-economic factors of rising populations, increasing development of countries at high-risk of catastrophes which naturally equals higher losses.
Read the full press release from Munich Re here.
Low severity disasters taking their toll on insurers says Moody’s
Meanwhile, Moody’s have reported that the increasing frequency of low-severity weather events is impacting P&C insurers underwriting results in the U.S. and causing them to be looked on as credit negative. Underwriting margins have been impacted and the frequency of such events is beginning to take its toll.
Losses for these events aren’t significant on there own, but over time they begin to impact profitability and reserves of insurers. Many of the events of this size that Moody references are too small to trigger reinsurance meaning that insurers have to cover them out of their own reserves. It seems likely that we will see an increasing number of insurers seeking extra cover through alternative risk transfer methods as we can expect these types of events to increase and they cannot continue paying for them with no risk transfer. More on this report from Moody’s on the National Underwriter website.