Reinsurance broker Aon Benfield has released its June Global Catastrophe Recap report today and the data shows that severe weather in the U.S. last month is likely to result in around $2 billion of insurance losses. That’s just at the latest estimates and there are a number of events which are likely to see increases in their estimates as claims continue to be assessed. Aon Benfield have not yet put a loss estimate on the Colorado wildfire either so once those are added June is looking like a reasonably heavy loss event for the re/insurance sectors.
The most costly severe weather event in the U.S. in June was an event that brought baseball-sized hail to parts of Texas and New Mexico. According to the Insurance Council of Texas, insured losses in the state will exceed $1 billion, with more than 100,000 claims filed by the end of June. Another hail event in Colorado and Wyoming has resulted in at least $700m of insured losses according to the report, again that figure could rise. Both of these events are evidence of the potential losses that can be suffered from severe hail events and the need for suitable risk transfer solutions (as we’ve discussed previously).
So that’s $1.7 billion alone without even considering the recent ‘derecho’ event in central and eastern U.S. states. That event at the end of June and extending into July saw at least 15 lives lost, extensive blackouts which impacted up to 4.2 million electricity customers and over 50,000 insurance claims according to Aon Benfields report. As yet they do not have an insured loss estimate for the event but it is likely in the low 100’s of millions observers have said.
Other U.S. events included in the report are tropical storm Debby which turned into a lower impact event than had originally been through. Economic losses from Debby are put at $100m meaning insured losses will be lower. The Colorado wildfires do not have an estimate attached to them as yet so are not included in the numbers in the report.
Around the globe a number of events are worth mentioning. June saw some severe flooding in China which is estimated to have caused over $3 billion of economic losses. Given the low penetration rates of insurance in China the insured loss total will be significantly lower, but again this demonstrates the potential for large loss events in that country. Typhoon Guchol which impacted Japan is thought to have resulted in around $100m of losses.
Given the extreme heat that the U.S. has suffered during June and into July there will be significant business and economic impacts which are not covered by insurance at all. These are the types of losses, such as temperature related, that weather risk management tools such as weather derivatives would be more suitable for. The actual economic impact of periods of extreme heat such as this are extremely hard to quantify.
You can download the full report from Aon Benfield here.