loss creep

While lawsuits against insurers in Florida are said to have declined again across the first three quarters of 2024, the claims environment following hurricane Milton is expected to provide a “true test” for the legislative reforms that were enacted to reduce the litigious property insurance environment in the state.

After three recent partial or full defaults of catastrophe bonds due to rising losses from prior period events, Swiss headquartered cat bond fund manager Icosa Investments AG has highlighted the risk of loss creep as something investors need to be aware of when allocating to the asset class.

Global reinsurance giant Swiss Re has called for an industry focus on the issue of loss creep after natural catastrophe events in Europe, saying it is an “industry-wide phenomenon”, that shows the need for more up-to-date insured values to be used and for better information flow along the market chain.

During the third-quarter of the year, Universal Insurance Holdings, the Florida headquartered primary insurance carrier, continued to experience loss creep from 2017’s hurricane Irma, ceding additional losses through to reinsurance sources.

In June and July we understand that loss creep related factors have continued to affect some insurance-linked securities (ILS) funds, particularly those focused on private collateralised reinsurance deals, as uncertainty persists over potential impacts from the COVID-19 pandemic and prior year catastrophe losses begin to crystalise.

Loss costs on Florida property insurance business continue to be impacted by social inflation, according to the CEO of Universal Insurance Holdings, but this hasn’t put the carrier off writing more business in the state, with its Florida book expanding in Q2.