While the overall re/insurance market remains resilient despite record losses throughout 2017 and 2018, industry players must adjust to a rapidly hardening market and think differently from the way they have in the last decade, according to a report by Aon.
Wildfires, cyclones and severe thunderstorms caused $225 billion in economic losses globally in 2018, $90 billion of which was insured.
That figure stands 50% higher than the annual average between between 2000 and 2017.
Furthermore, cat losses made 2017 and 2018 the most expensive two-year period for insurers ever recorded.
“In a volatile business environment, it’s imperative for industry players to not only understand the impact of weather-related events and other changes, but also leverage the tools and expertise available to them,” explained Aon Canada’s Chief Broking Officer, Russell Quilley.
“Putting innovation to work, and finding efficiencies in risk management and transfer solutions, will be more critical than ever.”
With 20% of total economic losses cyclones and hurricanes were the most significant cause, along with wildfires in California, flooding in Japan and drought in the United States.
Aon’s report states that Insured losses reached $90 billion, down from $134 billion in 2017.
Against those losses, global insurers’ had a larger capital base, which grew 3.3%, to $4.4 trillion, by the end of 2017.
Additionally, Aon states that the reinsurance market is well capitalised, despite a 3% decline in total reinsurance capital from 2017 to 2018.
Global reinsurer capital stood at an estimated $585 billion in 2018, still 30% higher than in 2011.
The top risks for insurers identified in the 2019 Aon Insurance Market Report include cyber attacks and data breaches, damage to reputation/brand, business interruption, regulatory changes, weather/natural disasters and an economic slowdown.