Zurich based independent provider of industry-wide European catastrophe insurance loss data and indices to reinsurers and ILS specialists, PERILS AG, has added six more European windstorms to its list of storms to investigate, taking the tally to nine so far this season.
The number of storms investigated in the 2013 – 2014 European winter storm season demonstrates just how severe the weather has been and what an unusual spell of weather the continent has experienced in recent months. In 2011/12 PERILS investigated six in total, while in 2012/13 no windstorms deserved investigation.
It is still early in the accepted season for European windstorms, with the season running until April. For nine storms to have already been considered potentially severe enough to qualify for reporting already PERILS clearly has its work cut out. Of course this also signifies that aggregate insured losses are on the rise and insurers as well as reinsurers may be adversely impacted.
To place a catastrophe event ‘under investigation’ means that the event has the potential to result in a market-wide insured industry property loss exceeding €200m. Therefore it deserves further analysis and PERILS makes an initial investigation of a storm’s potential to cause a sufficiently large insurance industry loss as the first step in its process.
If it becomes apparent that a storm is likely to cause a €200m market-wide loss then it will be reported on, based on information PERILS receives from data providing insurance companies.
So far one European windstorm this year has qualified for reporting by PERILS, European windstorm Christian from October has been given an initial insured loss estimate of €994m. European windstorm Xaver was the next to be placed under investigation in early December, followed by European windstorm Dirk at the end of that month.
Now PERILS has added six more windstorms to its list of catastrophe events under investigation. European windstorms Bernd from the 18th December, Erich from the 26th December, Felix from the 30th December, Gerhard from the 1st January, Anne from the 2nd January and the most recent windstorm Christina from the 5th January.
Dr. Eduard Held, Head of Products at PERILS, told Artemis; “The high number of European windstorm events under investigation reflects a very active European windstorm season. This can be seen as a consequence of a favourable macro weather situation with high temperature and pressure differences between sub-polar and sub-tropical zones in the eastern Atlantic for most of December 2013. Our decision to define an investigated event as a qualifying event (> EUR 200m) depends on information collected from insurance companies active in the affected territories and on other information such as wind footprints and gust speed values.”
Not all events will qualify for being reported on but it is extremely likely that Christina will, given the extent of recent wind and flooding across particularly the UK and Ireland. Also looking like they have the potential to qualify, in Artemis’ opinion, are Dirk and Xaver given the reports of losses so far.
For nine European windstorms to have been placed under investigation already is unusual and shows that all of them will cause some level of insured losses. How great the losses will be in aggregate across the storms is impossible to forecast at this time, but it will become a meaningful loss in the low billions of Euros in aggregate across the winter season so far.
For any European windstorm catastrophe bonds which accumulate losses on an aggregate basis, only the events which qualify for full investigation by PERILS will count as all such cat bonds use PERILS AG industry loss triggers. Some catastrophe bonds may be exposed to this accumulation but it is impossible to say if any are at risk yet. There may also be some industry loss warranty (ILW) contracts exposed to the severe European windstorm season.
Large reinsurers who underwrite UK and European property catastrophe treaties may find themselves facing some losses from this accumulation of European windstorm loss events. There is also the potential for any collateralized reinsurance entities or funds which participate in large European reinsurance programs to take some level of losses from the accumulation.
The weather this winter is proving exceptional, both within Europe and also the United States with the winter storms set to cause losses as well. With some months of winter still to go more European windstorms should be expected and with the flooding event in the UK still ongoing insurers and reinsurers will continue to count the claims for some days to come.
It’s worth noting that the UK flooding event, a catastrophe risk covered by PERILS AG’s services, may also become an event under investigation once the current spate ends, taking the total events investigated this winter to 11 including the Sardinia floods from November.
Read our article from yesterday: Losses mount in worst European winter storm season since 1990.