Gallagher Re’s Q1’24 Natural Catastrophe and Climate Report underscores the critical need for the insurance industry to evaluate unexpected factors that extend event loss behaviour, while also addressing the growing challenge of social inflation.
The report identifies event loss underestimation as the most pressing issue, with complexities in loss development varying significantly by peril and region.
An example provided by reinsurance broker Gallagher Re is the significant loss development following Italy’s series of catastrophic hailstorms in July 2023.
Initial estimates that began in Q3 2023 into early 2024 suggested insured losses of around $3 billion, however, these estimates have surged to approximately $5.5 billion, marking an 81% increase in insured loss progression. This substantial growth caused shocks within the local industry.
Factors contributing to this growth included delays in claim reporting due to the timing of the event during a holiday period, as well as challenges in assessment caused by the widespread nature of the event and a shortage of available adjusters. Additionally, a surge in auto claims, increasing home market prices, costly building improvements, and elevated construction costs further complicated the situation.
Such cases emphasise the importance of managing uncertainty in loss development within the insurance industry.
Gallagher Re outlines several crucial options for companies to safeguard themselves: “Investment strategies involving retrocession contracts, aggregate reinsurance covers, and various insurance-linked securities (ILS) funds.”
