2021 has proven to be the fifth consecutive year of above average claims from natural catastrophes, with insured losses totalling $122.4 billion, primarily due to the quantity of medium-sized losses across multiple perils and regions, according to analysts at Jefferies.
Jefferies also expects that with insured losses at 58% above average, it’s likely that catastrophe claims will exceed FY 2021 budgets across the industry, with the proportion incurred by reinsurers being higher than last year.
The company’s model suggests that the global natural catastrophe insured loss burden reached $122.4bn in 2021, making it the fourth costliest year on record, being +58% above the 10-year average, or +69% higher than the long-term average.
The top perils were tropical cyclones and severe weather, as expected, but the third and fourth largest perils were winter weather and flooding, which analysts say were both material outliers in 2021.
Overall, insured losses were reported across a broad range of perils and regions, which was similar levels to 2011. One positive point is that the proportion of insurance coverage appears to be rising, albeit still at a slow rate.
Nevertheless, Jefferies warns that a significant protection gap remains, aligning the industry’s interests with broader society and creating a growth opportunity.
The analysts also estimate that tropical cyclones accounted for the highest proportion of insured losses, followed by severe weather, winter weather and then flooding.
Jefferies added that the costliest insured losses of last year were Hurricane Ida which came in at $35.1bn, US Severe Weather, totalling c.$23.4bn, Winter Storm Uri at $15.3bn, and the European floods from July which amounted to $12.9bn.
Jefferies’ estimate is also inline with Munich Re who reported an estimate of $120bn in insured losses, which is above some other estimates for the year, including Swiss Re’s USD $112 billion figure announced in December.
Gallagher Re had also reported a slightly lower estimate of $116 billion, with Aon’s one of the highest at $130 billion.
The company also noted: “Nevertheless, just because our estimates have risen and some industry forecasts have been revised up, this does not necessarily indicate that underwriter’s have set imprudent initial loss picks.”
