2014 still trending below average for catastrophe insured losses: PCS

The third-quarter of 2014 saw both a below average frequency of catastrophic loss events and below average insurance industry losses as a result, according to the latest data from Property Claim Services (PCS) Q3 2014 catastrophe report.

PCS’ latest catastrophe loss report finds that the frequency of occurrence and resulting insured losses from catastrophe events remains well below the long-term average in 2014. After Q3 the insured loss total for the first nine months of 2014 has ticked up to $13.6 billion, based on events that PCS classifies as a catastrophe series event, which is up 13.2% on the total for 2013 but well below the ten-year average of $18.7 billion.

For the first nine months of the year PCS designated 26 catastrophe events, the same number as in the equivalent period a year earlier. However, the industry insured losses resulting from these events is 13.2% higher, suggesting an increased severity in the nature of 2014 losses so far.

The number for the first nine months, of $13.6 billion will rise as well, as PCS has resurveys open on five of the catastrophe events and one event, a late September wind and thunderstorm event, is yet to have its first catastrophe loss estimate.

Nine month U.S. catastrophe insured loss activity - Source: Property Claim Services (PCS), a division of Verisk Analytics

For Q3 2014 on its own, catastrophe losses were only $1.2 billion from six designated events, according to PCS, which is the lowest level of insured losses from designated cat events in ten years. The quietest quarter in the last decade for insured catastrophe losses will be no solace to insurers and reinsurers, as catastrophe activity remains benign and is a long way from causing a drain on capital in the sector.

Third-quarter catastrophe insured losses - Source: Property Claim Services (PCS), a division of Verisk Analytics

Frequency of catastrophe events was also down in the third-quarter of 2014 at just 6 events, below the long-term average of 7.7. The largest catastrophe event of the third quarter, a mid-August wind and thunderstorm event that struck Maryland, Michigan, and New York, caused a little over $500m in insured losses and accounted for almost 40% of the quarter’s insured losses. No other events exceeded PCS’ resurvey threshold of $250m.

Texas has suffered the highest level of insured catastrophe losses so far this year, at $1.9 billion. Nebraska is next, at $1.2 billion, followed by Illinois and Pennsylvania, both of which sustained catastrophe losses of approximately $1.1 billion. Catastrophe losses in Colorado reached approximately $800m but Oklahoma, which typically sees high catastrophe frequency, is not even in the top ten most affected states.

In terms of losses by line of business, personal lines accounted for 61% of catastrophe losses in the first nine months of 2014 ($8.3 billion), down slightly from 63% for the first half. Commercial lines losses rose slightly to 20%, up from 17% in the first half of 2014. This can be attributed to the late-August earthquake near American Canyon, California. Auto losses fell slightly to 19% (from 20%). For the third quarter, personal accounted for 62%, with auto at 21% and commercial at 17%.

For Canada, which PCS also covers in terms of catastrophe loss designation and reporting, four events have been designated so far this year with two occurring in the third-quarter. Year to date the insured catastrophe losses in Canada total almost C$700m, which makes this year the quietest since PCS launched a Canada service.

Frequency is down as well as losses for Canada, with the four events recorded this year a good deal below the 5.7 average. The two events in the third-quarter in Canada resulted in insured losses of C$553m, occurring in Ontario and Alberta, which are the country’s most catastrophe-prone provinces.

While insured catastrophe losses remain so low in the U.S. there is nothing to put any upwards pressure on property catastrophe reinsurance rates. In fact, such a benign quarter will only serve to put more downwards pressure on reinsurance rates at the upcoming renewals, as long as the rest of 2014 remains relatively benign or with an average level of insured losses.

PCS’ Q3 2014 catastrophe report contains more details and analysis of the activity and insured losses suffered during the third-quarter and the first nine months of 2014. You can download a copy of the full report via the PCS website.