Insurance and reinsurance industry losses from convective storms in the U.S. appear to be accelerating in 2017, with Aon Benfield’s Impact Forecasting unit expecting losses will “well exceed” $100 million from events in the past week, on top of a very active January.
Artemis discussed recently that Impact Forecasting, the catastrophe risk-modelling unit of reinsurance broker Aon Benfield, expects insured losses from severe convective weather in the U.S., in January alone to surpass $1 billion.
Now, in its weekly catastrophe report, February 10th, 2017, the firm highlights additional losses from severe convective weather in the U.S., which impacted parts of Southeast U.S., including Louisiana, Mississippi, and Alabama.
Also, extensive damage was caused by an unexpected number of tornadoes that struck parts of New Orleans on February 7th, with some areas devastated by hurricane Katrina being heavily impacted during the tornado outbreak, says the report.
According to Impact Forecasting, the Storm Prediction Center (SPC) preliminary received 137 reports of tornadoes, of which 16 were tornadoes, 93 damaging winds, and 28 large hail events, from February 7th to February 8th, 2017.
“With assessments remaining in their preliminary stages, it remains too early to provide an exact economic and insured loss estimate. However, it is expected that losses will well exceed USD100 million.
“The severe convective storm losses follow an active January, in which total insured losses exceeded USD1.0 billion alone from tornadoes, large hail and damaging winds,” says the report.
An increase in frequency losses, which can often be driven by severe winter weather and convective storms in the U.S., is becoming increasingly important to the insurance-linked securities (ILS) market.
By increasingly looking to work with a broader range of insurance and reinsurance-linked business, with a focus on U.S. catastrophe lines, ILS players are likely to become more and more exposed to frequency events and will likely end up needing to reserve for and perhaps pay more losses if the active trend continues in 2017.
It’s important to note though that these convective storm losses will sit within the expected catastrophe budgets of insurance and reinsurance firms, so pose nothing particularly unusual for the ILS market to deal with. It is losses over the course of the year that may matter, as aggregate deductibles could begin to erode early on for some contracts.