Impact Forecasting, the catastrophe and weather risk analysis arm of reinsurance brokerage Aon Benfield, has estimated the insurance industry losses from 2017 catastrophes and severe weather events at $134 billion, just slightly below the record high seen in 2011 of $137 billion.
Aon’s $134 billion estimate, from its new Weather, Climate & Catastrophe Insight: 2017 Annual Repor from Impact Forecasting, is aligned with those of the major reinsurance firms, after Munich Re put the total insured loss at $135 billion and Swiss Re $136 billion.
Given these are all fairly preliminary estimates, there is still a good chance that the total rises further, once the full extent of losses from the third and fourth quarter are understood. So it is possible that 2017 becomes the most costly year on record for insurance and reinsurance interests, by Impact Forecasting’s reckoning.
However, despite the major losses, the reinsurance industry remains robustly capitalised and able to absorb losses of this magnitude.
Eric Andersen, CEO of Aon Benfield, explained, “While 2017 was an expensive year for the insurance industry, the reinsurance market had an estimated USD600 billion in available capital to withstand the high volume of payouts. Most critically, the US weather and wildfire events in particular have demonstrated the value of reinsurance, with claims being paid in an average of eight days to augment the recovery process.”
Hence the disappointment of the January renewals, as reinsurance pricing did not rise as much as reinsurers would have liked, due to the weight of capital and the interest in the sector.
Aon Benfield counted 330 natural catastrophe events in 2017, resulting in total economic losses of $353 billion.
The majority, or 97% of the total, was due to weather-related loss events, which totaled $344 billion on an economical basis.
The largest events were hurricanes Harvey, Irma and Maria in the U.S. and Caribbean, Typhoon Hato in China and Cyclone Debbie in Australia.
2017’s natural catastrophe losses were 93% higher than the ten-year average from 2000-2016.
The estimate of insurance and reinsurance losses is for both the private sector and government-sponsored programs, such as the NFIP. The $134 billion of insured losses in 2017 was just behind the record $137 billion from 2011 and 139% higher than last year’s $56 billion.
Aon notes that this rise is primarily due to the fact there is a high level of insurance penetration in the U.S. and the very active Atlantic hurricane season, severe weather events (convective storms) and wildfires that struck the nation.
Steve Bowen, Impact Forecasting director and meteorologist, commented, “The high cost of disasters in 2017 served as a reminder that we continue to face increasing levels of risk as more people and exposures are located in areas that are particularly vulnerable to major, naturally occurring events. As weather scenarios grow more volatile in their size and potential impact, it becomes more imperative than ever to identify ways to increase awareness, improve communication, and lower the insurance protection gap. We know natural disasters are going to occur. The question is how prepared are we going to be when the next one strikes.”
Aon’s research found that only 36% or $80 billion of economic damage from hurricanes Harvey, Irma and Maria was insured.
Over the course of 2017 there were 31 billion-dollar loss events around the globe, with 16 in the U.S.
The latest Weather, Climate & Catastrophe Insight: 2017 Annual Repor from Impact Forecasting highlights a number of other recent events:
- An October wildfire outbreak, the most destructive ever recorded in the US state of California, caused nearly USD13 billion in economic damage
- Substantial summer flooding causing more than USD12 billion in damage across China
- Southern Europe endured an extended drought during the summer and autumn months that caused USD6.6 billion in damage across parts of Spain, Italy and Portugal
- Elsewhere in Europe, the costliest thunderstorm event of the year affected central sections of the continent, particularly Poland, and left a damage bill of nearly USD800 million
- In Mexico, two powerful earthquakes in September led to nearly USD6.0 billion in combined economic losses, including major damage across Mexico City on the 32nd anniversary of its historic 1985 tremor.