RBC Capital Markets highlights the surge in high frequency, small and mid-sized catastrophe events during the first three quarters of 2023, largely driven by a growing trend of severe convective storms (SCS) in the United States.
Overall, catastrophe losses reached approximately $77 billion after the first nine months of 2023, with an estimated $28 billion in the third quarter alone, according to RBC.
This compares to the average of $105 billion for the entire year, recorded over the past decade.
What sets this year apart is the sheer frequency of events, in contrast to previous years when a few double-digit billion-dollar events dominated the scene. In 2023, the losses were primarily incurred from a high frequency of smaller to mid-sized events, which have been absorbed more by the primary market in part due to the uplift in attachment points.
Historically, reinsurers have shouldered a significant portion of these losses through aggregate covers. However, the scarcity of such coverage options has led primary insurers to retain the majority of the losses, a trend expected to continue.
Natural catastrophes have played a major role in this year’s insured losses, accounting for roughly $77 billion of the $79.2 billion total reported by RBC, with the remainder coming from man-made events.
The United States, in particular, has been heavily impacted by SCSs, which have resulted in insured losses of over $50 billion, far surpassing previous records. Typhoons, including Typhoon Doksuri in China, also contributed substantially to the total, with an insured loss of $12 billion.
Floods, wildfires, and hurricanes in various parts of the world, including Hawaii, Germany, Italy, and Morocco, have added to the growing tally of natural disaster losses, exemplifying the diverse geographic scope of these events.
While big wind events such as hurricanes or cyclones have traditionally been considered the primary catastrophic risk for the insurance sector, the increasing frequency of smaller wind events, notably SCS, is proving to be a costly challenge.
Gallagher Re estimates that insured losses resulting from SCS have exceeded $50 billion in the United States in 2023, a figure comparable to the cost incurred during Hurricane Ian’s landfall as a Category 4 hurricane in Florida the previous year.
