Reinsurance News

Q3 reporting highlights up to $50bn gap from disclosed Hurricane Ian losses: JP Morgan

18th November 2022 - Author: Luke Gallin

The total claims amount relating to Hurricane Ian, based on data from major European, American, and Bermudian insurers, are near the $20 billion mark, but with the largest industry loss estimates from the storm at around $70 billion, there could be a gap of roughly $50 billion from the losses disclosed so far, reports JP Morgan.

protection gap imageIn its latest Love Actuary report, JP Morgan analysts examine Hurricane Ian loss estimates almost two months after the storm touched down on the Florida coast.

Hurricane Ian made landfall as a strong Category 4 storm, bringing extremely strong and damaging winds, and intense rainfall and storm surge impacts to the State of Florida.

While it will take some time before the full extent of the damage and ultimate hit to the re/insurance industry is properly understood, industry estimates point to a loss of anywhere between $50 billion and $70 billion, making it the second most expensive catastrophe loss event in history for the market.

As noted by analysts, so far, the biggest losses related to Ian have been reported by Berkshire Hathaway ($3.4bn), Citizens Property Insurance ($2.6bn), Munich Re ($1.7bn), Swiss Re ($1.3bn), and Universal Insurance ($1bn). Together, these firms have disclosed losses of around $10 billion, with a further, combined ~$10 billion having been reported by other re/insurers, including the likes of Chubb ($975m), Zurich ($550m), Allstate ($366m), and PartnerRe ($300m).

Stratumn, by SIA Partners

It’s worth noting that Citizens recently announced a revised estimate of $3.8 billion, which incorporates the results of a second hurricane model, and also includes additional provisions for litigation costs and inflation.

“Given the total disclosed claims are at $20bn currently, there is still a gap of $30-50bn from looking at bottom up industry loss estimates,” say analysts.

With Q3 2022 reporting season now done, the up to $50 billion gap highlighted by JP Morgan is interesting. Florida’s property insurance market has some unique challenges which haven’t been fully addressed, despite legislative efforts, so it could be that the gap is where all the expected litigation, social inflation, and loss adjustment expense inflationary impacts come into play.

Come end of year reporting in early 2023, it will be interesting to see if there’s any major adjustments to loss picks from insurers and reinsurers in relation to Hurricane Ian, or whether estimates from risk modellers start to trend towards the lower ends of estimates.

What is certain, is that Hurricane Ian has contributed greatly to what’s set to be another extremely costly year for insured nat cat losses.

Analysis by JP Morgan shows that even at the lower end of the range, so $50 billion, Ian would be the second costliest hurricane of all time, behind only the $90 billion (2021 price-adjusted) caused by Hurricane Katrina in 2005, and ahead of 2017’s Hurricane Irma, which drove industry losses of $37 billion (2021 price-adjusted).

But it’s not just Ian that insurers and reinsurers have had to manage this year, with the Australian floods, French hailstorms, and Typhoon Nanmadol also adding to losses through the year.

In light of this, JP Morgan now estimates that 2022 insured nat cat losses will be between $120 billion and $130 billion, making it the fourth costliest year of all time.

“Including 2022, insured nat cat losses over the last six years have been ~$630bn, materially higher versus the previous six year period (~ $410bn),” say analysts.

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