In the middle of the 2017 hurricane season weather conditions are causing high intensity storms and hurricanes to form in the Atlantic basin, and with the industry still waiting for the tally from Harvey and now Irma, reinsurers will have to go into renewals under a cloud of “uncertainty.”
Speaking at the reinsurance Rendezvous de Septembre, Munich Re Chief Executive Officer (CEO), Torsten Jeworrek, said the uncertainty caused by the active hurricane season so far will test the market; “What will happen now? Loss estimates from the floods will take a long time, months, maybe a year or so until the loss figures for the various companies and for our industries will be stable.
“That means we have to go with a lot of uncertainty into renewals. We don’t know what could happen to alternative capital. Will collaterals remain locked at the end of the year?
“We’ll see whether certain collateral structures maybe less so cat bonds will be triggered or not. It’s a very uncertain situation and it will probably be the first test for the market.
“When I talk about hurricanes like Harvey, it’s a pretty normal event I’d say. What we saw in the last years where there was no major Hurricane flood event in the states, that was unusual, so we should expect landfall from time-to-time and therefore these events are absolutely within our risk strategy.
Hurricane Harvey, the first landfall of a major hurricane category 4 in the U.S. after Wilma in 2005, has been followed by hurricane Irma, the strongest hurricane ever recorded in the Atlantic basin outside the Caribbean and the Gulf of Mexico.
And with the hurricane season being far from over and atmospheric conditions still ripe for high intensity storms, the industry must be prepared to brace for further severe weather events as it goes into the renewal season.
Munich Re, said; “In September, we are in the middle of the season, on average about 60% of storms occur at this time of the year the conditions are still favourable for hurricane formation, but the locations of landfall will decide how much damages occur. Nobody is able to forecast this for the time being.
“In the long run climate change is expected to intensify hurricanes, but not cause an increase in hurricane frequency.”
Speaking of Hurricane Irma’s expected impact, Jeworrek said; “We always budget for expected nat cat events, what the real impact will be realistically, I can’t tell.
“The range for losses will be significant at this early stage. My best would be that insured losses would be comparable to insured losses from Sandy. It will be a significant event, more wind-driven than flood-driven.”
He estimated an insurance industry loss of between $20 billion and $30 billion for Irma, which would put it in line with Sandy.
Catastrophe risk modeller, AIR Worldwide, has estimated the insured loss for the U.S. from Irma at between $20 billion and $40 billion.