Catastrophe risk modelling firm AIR Worldwide has estimated that annual global catastrophe losses now average around $86 billion for the insurance and reinsurance industries.
AIR’s ‘2018 Global Modeled Catastrophe Losses’ report also estimated that the 1% aggregate exceedance probability insured loss (or the 100-year return period loss) from catastrophes worldwide is nearly $271 billion.
This compares with a 1-in-250 year return period loss of $342 billion, with both metrics now at the highest levels ever reported.
The data provides some insight into where the insurance and reinsurance industries can expect to see losses fall, in the event of a 100 or 250 return period year.
AIR’s estimate for annual insured catastrophe losses also seem to be aligned with recent experience.
The report based its global loss metrics on perils and regions currently modeled by AIR, including its new European severe thunderstorm and Southeast European earthquake and flood models, as well as updates to its European extratropical cyclone and U.S. Wildfire models and industry exposure databases for Europe, and the U.S.
“After a decade of below-average losses (apart from 2011 and 2017), 2018 will reinforce the fact that preparing for large losses before they occur is critical to continued solvency and resilience,” said Rob Newbold, Executive Vice President at AIR Worldwide.
“For the insurance industry, the protection gap can spur innovation in product development,” Newbold continued. “In the public sector, governments are recognizing the importance of moving from reactive to proactive risk management, especially in countries where the risk is well known and a risk transfer system is not well established.
“Understanding the protection gap can help governments assess the risks to their citizens and critical infrastructure, and develop risk-informed emergency management, hazard mitigation, and public risk financing strategies to enhance global resilience and reduce the ultimate costs.”
