Typhoon Jebi industry loss may settle at $15bn to $16bn: Analysts

The insurance and reinsurance industry wide loss from Japanese typhoon Jebi looks destined to rise even further, with analysts saying that industry participants they met with recently in Bermuda have suggested the loss may settle at between $15 billion to as much as $16 billion.

The industry loss from the most costly typhoon to ever hit Japan had already been estimated at close to $13 billion in recent weeks, but with estimates still rising for some exposed insurers the market anticipates a creeping impact for reinsurance capital that could take the toll even higher.

JMP Securities analysts had visited Bermudian reinsurance markets and insurance-linked securities (ILS) funds last week, to discuss the state of the market as the mid-year renewals fast approached.

One topic of conversation was the challenges faced in relation to the ongoing loss creep from typhoon Jebi, with those the analysts spoke with explaining that this is likely to continue.

Many of the contacts JMP Securities analysts met with told them of an expectation that the market-wide loss from typhoon Jebi will hit $15 billion or $16 billion, which will make it the most costly insured loss from a typhoon in Asia on record.

Many had previously thought that a Japanese typhoon industry loss could not hit the $10 billion mark, a point already eclipsed by typhoon Jebi.

Now the market needs to readjust its expectations for typhoon risk in Japan it seems, with double-digit billion dollar losses clearly possible and perhaps becoming increasingly likely, given the exposure levels in Japan are always on the rise.

The loss creep from typhoon Jebi could help to promote further hardening of reinsurance and insurance rates in Japan, the analysts believe, something which may now continue into next year’s renewals with further price rises possible.

“We think it will have a positive impact on the pricing environment for the Japanese April 1 renewals in 2020,” JMP Securities analysts said.

If this year’s typhoon season also proves impactful there is a very good chance now that this will be the case, especially if reinsurance firms continue to find retrocession harder to find after the contraction of capacity in that market.

There are numerous factors that have come into play to explain the loss creep seen with typhoon Jebi which we detailed in a previous article here.

Jebi has also triggered some losses for the industry loss warranty (ILW) market, as well as caused a total loss for the Mitsui Sumitomo sponsored Akibare Re 2016-1 catastrophe bond.

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