European windstorm insured exposures rise 4.1% to €60 trillion in 2019

European windstorm exposures, as measured by insured property values, have risen to almost €60 trillion in 2019, an increase of 4.1% on the prior year according to the latest data from PERILS AG.

Zurich-based PERILS AG, a provider of industry-wide catastrophe exposure, industry loss data and indices, has released a new industry sums insured data set, containing exposures as at an in-force date of 1st January 2020.

The size of the European windstorm exposure for insurance and reinsurance markets is laid bare in this database, as it has risen to almost €60 trillion of insured property values, made up of a massive 189 million individual insured risks.

The PERILS Industry Exposure Database 2020 (IED) contains the latest data regarding property sums insured and the number of risks exposed to natural perils in Australia, Austria, Belgium, Denmark, France, Germany, Ireland, Italy, Luxembourg, the Netherlands, New Zealand, Norway, Sweden, Switzerland, Turkey and the United Kingdom.

Having recently announced the extension of its line of business reporting to include Australian motor for both personal and commercial lines, PERILS has now added this important addition to the IED as well.

PERILS latest IED incudes details of USD 78 trillion of natural perils exposed sums insured.

The data encompasses some 236 million property and motor insurance policies, which together generate premium volume of USD 108 billion.

European windstorm remains the largest single exposure, with 186 million individual risks representing EUR 59.8 trillion of insured property values (up 4.1% in EUR terms,2.9% at constant FX rates) compared to a year earlier.

In Australia, New Zealand, Italy and Turkey, year-on-year variations all showed strong sums insured growth ranging from 5% to 20%.

Luzi Hitz, CEO of PERILS, commented on the release of the new IED, “This marks the 11th annual release of the PERILS IED and as always we are extremely grateful to those companies which provide us with their data. Each year, we produce the market portfolios based on the Cat-exposed sums insured data provided by insurers in each country and by calculating the market sums insured based on that data. Moving forward, we will continue to seek out opportunities to expand our coverage to cover other important Cat markets.”

Eduard Held, Head of Products at PERILS, added, “The availability of high-quality market exposure and loss data based on identical sources and methodology is much valued by users of our database. Having both available in a consistent format not only supports a range of model validation activities but also facilitates more effective risk transfer. While PERILS loss data are used for the trigger of insurance- linked securities and ILW transactions, the exposure data enables users to define custom-made triggers resulting in reduced basis risk for protection buyers.”

Darryl Pidcock, Head of PERILS Asia-Pacific, also said, “This update marks the first time that motor exposure and loss data are made available in the Australian market. As motor is a major Cat-exposed line of business in this market, today’s announcement is a natural expansion of PERILS coverage to meet the needs of our subscribers. We are particularly grateful to our insurance partners who have been extremely supportive in sharing their data.”

Given the huge sums at risk, it’s no surprise that capital efficiency to transfer the risk is increasingly important, or that ILS fund managers and markets are beginning to find ways to access insurance business more directly with their capital.

But when it comes to the European windstorm peril pricing remains depressed, as this is a region where the large, traditional reinsurance community in the region holds the lions share of the risks.

It is the large reinsurance firms ability to soak up risks in one region due to their diversification, both geographical and line of business, that keeps rates particularly low in European catastrophe risk programs.

That’s a problem for the ILS market and has resulted in many ILS fund managers electing to downsize their European catastrophe reinsurance portfolios in recent years, as the pricing has not risen even commensurate with the perceived and modelled changes to the risk profile in the region.

It makes Europe a hard place for the collateralised reinsurance product to compete, but also an opportunity if the pricing becomes more realistic again in future.