Catastrophe Claims 48% Above Average by End of November: Jefferies

Jefferies analysts reported that insured natural disaster losses are 48 percent higher than the long-term average as of the end of November, and 34 percent higher than the 10-year average.

Source: Reinsurance News | Published on December 20, 2021

hurricane insurance

According to Jefferies, it now appears certain that insured catastrophe losses will be far higher than the annual totals for the previous three years, despite

November being the lowest month for insured losses so far this year.

This is before accounting for the recent series of Midwest tornadoes, which KCC estimates will add $3 billion to re/insurers' catastrophe bills but many in the industry believe will be much higher.

According to Jefferies, losses were minimal and spread across a wide range of perils and regions in November, with the Canadian floods causing the highest industry loss of around $400 million.

Windstorm Arwen, which caused strong winds and power outages in the United Kingdom, Ireland, and France, is estimated to have caused $300 million in re/insured losses.

Overall, according to Jefferies, insured catastrophe losses in November were 65 percent lower than the 10-year average, making this the third consecutive benign month and the lowest monthly loss total of 2021 so far.

According to analysts, this was primarily due to the near total absence of wildfire and tropical cyclone losses reported in comparison to previous years, particularly in the United States.

However, when looking at the entire year, a much different picture emerges, with numerous high severity events spanning multiple perils and regions, including Hurricane Ida in August and severe winter weather in the United States in Q1.

Outside of the United States, Europe has also experienced unusually volatile weather, most notably in July, when flooding caused more than $10 billion in losses.

According to Jefferies, as of November 30, Ida was the costliest catastrophe event of the year, causing an estimated $32.2 billion in insured losses, followed by US severe weather at $17.2 billion and US winter weather at $15.3 billion.

Following that, analysts estimate that European floods will cost $10.2 billion, European severe weather will cost $3.8 billion, US wildfires will cost $1.5 billion, and China floods will cost $1.4 billion.

However, it's worth noting that this analysis does not yet take into account the December tornadoes in the United States, which are expected to rank high on this list even with conservative estimates.

According to Jefferies, the year-to-date above-average losses are likely to put additional strain on the adequacy of many underwriters' natural catastrophe loss budgets, with Q3 results already indicating that many budgets will be exceeded.

As a result, analysts anticipate significant rate increases for property-catastrophe contracts at the upcoming 1st January 2022 reinsurance renewals.