Secondary perils have dominated 3Q23 and 2023YTD, causing secondary-type losses in larger numbers compared to any of the major peak catastrophe zones, according to JP Morgan analysts.
Atlantic hurricane season is always the key headline for the reinsurers in late summer and early autumn each year. Atlantic windstorms, California earthquakes, Japanese earthquakes, Japanese windstorms, and European windstorms are the five major perils reinsurers face.
Historically, these scenarios have seen large events and given the concentration of insured values in these areas, which lead to the most severe levels of claims for the industry.
Analysts explain: “Despite the enhanced focus on these perils, there are thousands of scenarios globally that can lead to material levels of insurance claims. Looking at major natural catastrophe claims YTD, we can actually see that the majority has come from what we would term secondary events on a global basis.
“The largest event was the US convective storms seen in 2Q23 that in total caused around $35bn of insured losses (based on Aon data), which is a material amount, with Hurricane Ian, the second-costliest hurricane of all time in 2022 costing $60bn for context.”
According to JP Morgan, of the major events to impact in 2023, the only peak peril-related loss has been Hurricane Idalia, which cost around $4bn in 3Q23.
The remainder is made up of secondary-type events that reinsurers need to ensure are adequately reflected in pricing, analysts highlight.
The European reinsurers restructured their reinsurance offerings in 2023, in general pushing retentions higher. The impact has been clear in results, JP Morgan pointed out, with the group on the whole avoiding some of the smaller/secondary-type losses, with the US convective storms a stark example of this.
“We would note that the major loss ratios for the European reinsurers were below budget at 1H23, which is a positive outcome compared to some of the US primary insurers that saw far more material levels of catastrophe claims in the period,” analysts concluded.
