Insured losses in December were nearly five times their average, according to a new report from Jefferies.
The investment bank’s report, named The Weather Front, said that while October and November were ‘benign’ for the insurance and reinsurance industry, ‘December proved to be unexpectedly costly’.
“These high insured losses,” wrote its analysts, “were mainly driven by the Colorado wildfire and tornado outbreaks across the US.”
The analysts added: “In late December, US wildfires appear to have been particularly costly, largely due to the Marshall Fire in Colorado. Our estimate of $2.5bn is slightly above industry estimates of $1bn-$2bn, prompting us to agree with Aon Benfield’s assessment that the Marshall Fire was the costliest wildfire outside of California. Nevertheless, on our estimates, wildfire losses appear to have caused less damage over the year than those in 2017, 2018 and 2020.”
It was in the US that analysts said that the highest contributor to insured losses in December was down to severe weather peril.
They wrote: “Amongst the severe weather losses, the largest incurred loss was due to the tornado outbreaks across the Plains and Southeast regions, which caused widespread property damage. We estimate the tornado outbreaks cost $3.9bn, in line with industry estimates of $3bn-$5bn.”
Meanwhile, wrote the analysts: “Insured losses from perils such as the Thailand floods, Typhoon Rai and European Windstorm Barra, were all benign relative to US severe weather and wildfire.”
The bottom-line impact, wrote the Jefferies analysts, is that catastrophe loss budgets will be exceeded for last year.
They wrote: “Thus we were not surprised to find that the 1st January 2022 renewals featured material rate rises, with the Guy Carpenter’s and Howden’s property-catastrophe index rising 10.8% and 9%, respectively.”
The wildfires in Colorado are a source of continuing pain for many. Two weeks ago, AM Best warned that demand surge, along with inflation, was likely to amplify losses relating to the wildfires, which destroyed more than 1,000 buildings in two days.
According to AM Best at the time, direct premiums written by property lines in Colorado were around $6.9 billion, meaning the losses will account for some 15 percentage points in the property lines’ loss ratio in the state.
