Analysts at JP Morgan have estimated that total natural catastrophe insured losses in Q1 so far are in the region of $6-8 billion.
The analysts write, “Despite there being a month to go in the quarter, losses still feel well below quarterly averages. Looking at the last 10 years, the average industry loss for Q1 is around $13.5bn which, adjusting for inflation, is probably close to $15bn for 2023.
“Therefore, we feel confident at this stage that the year has not got off to a bad start.”
They add, “In addition, material changes in retentions by the primary insurers should mean that a higher proportion of losses end up with the primary insurers rather than the reinsurers.”
CoreLogic, a global provider of property information, analytics, and data-enabled solutions, recently estimated that the earthquakes in Turkey will cause insurable damage of $5 billion.
Meanwhile, catastrophe risk modeller Moody’s RMS anticipates that economic losses from the two earthquakes will surpass $25 billion, with insurance and reinsurance industry losses expected to exceed $5 billion, in line with CoreLogic.
Analysts at Karen Clark & Company (KCC) have estimated that total property insurance and reinsurance industry losses from the earthquakes will total $2.4 billion, with economic losses pegged at close to $20 billion.
Elsewhere, The Australian Reinsurance Pool Corporation’s cyclone cover was triggered by Tropical Cyclone Gabrielle, which recently struck New Zealand in what the country’s prime minister described as “the biggest weather event to hit the country in the past century.”
Re/insurers with policies in this part of the world suggested that the floods could trigger their reinsurance cover, with Suncorp and Tower Limited both recently releasing statements to that effect.
In California, only $1bn is expected to be insured from an estimated economic loss of over $30bn caused by fierce storms, torrential rain, high winds and flooding that the state has experienced since late December 2022, according to Argenta.
At the time, JP Morgan stated that the California floods were unlikely to be a huge loss for the insurance industry.
However, many firms have noted that the Turkey quake will be towards the upper ends of their estimates, while the recent winter storm in California will also drive further losses.
In addition, there has since been severe weather in southern US states, while Vanuatu has been hit by two cyclones and an earthquake in the last two days as well. Spelt out, there is no guarantee losses stay below average for Q1.
What is also important to note from these reports is the severity of the protection gap (disparity between economic and insured losses post-event) in some of these affected areas.
In Turkey, an economic cost of close to $20 billion for property losses, of which $2.4 billion is expected to be covered by insurance, points to a protection gap of around $17.6 billion, or 88%.
Speaking on this, Bill Churney, President of Verisk’s Extreme Event Solutions, said, “The sizable difference between insured and economic losses—the protection gap—represents the cost of catastrophes to society, much of which is ultimately borne by governments. Increasing insurance penetration can ease much of the burden.
“There are solutions available that can enhance global resilience efforts including, emergency management, hazard mitigation, public disaster financing, risk pooling, and other government-led risk- and loss-mitigation initiatives.”