Insured losses from major natural catastrophes totaled about US$71.5 billion (about CA$95 billion) in 2018, according to new data from global reinsurer Willis Re. Last year’s losses were slightly higher than the annual average since 2011, but the third-highest total of the eight-year period, the reinsurer said.
The eight-year average is driven upward by annual losses of US$120 billion in 2011 and US$143 billion in 2017. Unlike these years, in which one or two major natural disasters accounted for a large percentage of total insured losses, 2018 saw no major event to drive losses upward. Instead, the total came from a series of small and medium-sized catastrophes.
The largest single insured loss in 2018 was the Camp Fire in California, which looks set to cost reinsurers between US$6 billion and US$10.75 billion. Combined losses from the Carr, Mendocino, Camp and Woolsey wildfires are likely to run between US$15 billion and US$17 billion, according to Willis Re.
The insured loss range from Hurricane Michael is estimated at $6-$10 billion, while Typhoon Jebi in Japan caused an estimated $8.5 billion in insured losses. The largest European loss was wind storm Friederike, which caused insured losses of about $2 billion, according to Willis Re. No major insured loss from natural disasters occurred in Latin America or the Caribbean.
“The industry experienced a large number of mid-sized natural catastrophes,” said Karl Jones, managing director and head of International Catastrophe Analytics at Willis Re. “Three events – the Camp Fire, Typhoon Jebi, and Hurricane Michael – have all reached at least the high single-digit billions in insured losses, but only the Camp Fire seems likely to exceed the level of US$10 billion. However, a large number of smaller, billion-dollar losses – principally storms – has added up to make 2018 a costly catastrophe year. With the exception of the major California wildfires, these losses are well within modelled expectations.”
“The reinsurance industry has now absorbed more than US $200 billion worth of natural catastrophe losses over a two-year period,” said Vaughn Jensen, executive vice president and head of North American Catastrophe Analytics at Willis Re. “It has been a significant test for both traditional and ILS capacity, but overall the sector’s capitalization remains strong. The distribution of smaller catastrophes in 2018 has given retrocessionaires and excess loss insurers some breathing spaces, with the clear exception of aggregate covers as well as accounts with a concentration of exposure in California. The frequency of catastrophe losses over the last two years continues to result in many primary insurers rethinking their strategy around retention levels. Several sustained storms may also lead to reconsideration of hours clauses by cedants and reinsurers. On the back of this unusual catastrophe experience, we expect to see further reinsurance program adjustments as the year progresses.”