2016 U.S. catastrophe frequency the highest since 1980: PCS

2016 was the most active catastrophe year since 1980 in the U.S. as 43 PCS-designated cat events incurred insured damages of around $21 billion, according to the PCS full-year 2016 Catastrophe Review.

In North America it was a fairly busy year in terms of catastrophe events, with PCS designating 43 events in the U.S. and nine in Canada, resulting in an insured loss of roughly $21 billion in the U.S., and C$4.9 billion in Canada.

Artemis discussed last year how PCS data and analysis showed that the frequency of events in the U.S. was on the rise, and the firm’s 2016 report reveal that frequency events increased further in 2016.

The $21 billion insured loss reported in the U.S. is roughly 46% higher than the $14.3 billion recorded a year earlier, and the number of events, at 43, is 7% higher than the 40 PCS-designated events recorded in the U.S. during 2015.

Historical annual catastrophe activity - Source: PCS

So it’s clear, and as highlighted by the above chart, that both the frequency of events and the cost of those events to insurers, reinsurers, and also ILS players increased in 2016 when compared with the previous year, which could be an interesting trend to watch in the coming months.

ILS market participants continue to increase their participation in the global reinsurance landscape, and as they seek to broaden their peril and region exposure they are finding themselves increasingly exposed to frequency events.

“If 2015 was interesting – as we indicated in this report a year ago – 2016 was utterly fascinating. Frequency was up, and unusually large losses came from both wildfire and severe thunderstorm events,” explains PCS.

Furthermore, PCS notes that it has resurveys open on three catastrophe events, including hurricane Matthew, which could mean that the full-year 2016 insured loss figure is subject to change.

Over the last decade ending 2016 just two years, being 2011 and 2012, saw insured losses in the U.S. exceed $30 billion, with 2008 and 2016 being the only years to see losses reach $20 billion.

“Frequency, of course, reached a record-setting level for years with an industry loss event threshold of $25 million. Over the past decade, annual average frequency was 32 events, which puts last year 34 percent higher,” explains PCS.

High frequency catastrophe years - Source: PCS

The 43 events recorded in the U.S. impacted 44 different states, with Texas remaining the most affected in terms of insured loss, growing from $2.9 billion in 2015 to a staggering $7.96 billion in 2016, an increase of almost 200%.

The next state with the highest volume of insured losses from PCS-designated catastrophe events in 2016 was Colorado, at $1.5 billion, followed by Louisiana at $1.2 billion, with the remaining top ten most affected states incurring insured losses of below $1 billion.

As in 2015 personal losses dominated catastrophe losses last year, accounting for roughly 61% of the total. Auto losses increased from 13% in 2015 to 23% in 2016, while commercial losses accounted for 16% of total catastrophe losses in 2016, down from the 18% recorded in the previous year.

For the fourth-quarter of 2016 alone, and in the U.S., PCS states that an insured loss of $3.5 billion from four PCS-designated events, is in line with the ten-year average of 3.6 events and a $3.3 billion insured loss.

PCS Canada, which launched in 2010, recorded its quietest Canadian catastrophe year in 2015, but the story in 2016 was much different.

PCS designated nine events in Canada throughout 2016, including the devastating Fort McMurray wildfire, which, combined with six severe thunderstorm events and other catastrophes, resulted in an insured loss of roughly C$4.9 billion, nearly two-and-a-half times above the ten-year average, says PCS.

Interestingly, PCS launched its database for PCS Turkey last year, and the report explains that PCS designated two events in 2016, both being terror events, and that it will release an industry loss estimate during the first-quarter of this year.