Overall insured loss estimates from global natural catastrophes in 2020 totalled $78 billion, significantly higher than the $53 billion in 2019, according to a Willis Re report.
In the US, there were 22 events in 2020 that exceeded $1 billion, breaking the record of 16 in 2007, and the 2020 Atlantic hurricane season had 30 named storms, including 13 hurricanes.
Willis Re notes how this made 2020 the most active hurricane season on record, breaking the previous record of 27 storms in 2005.
The report also underlines that, in Florida, the frequency of weather events / hurricanes can be just as impactful when compared to a large severity event.
In addition to their current year losses, Willis Re says surplus declines were driven by adverse prior year loss development with many companies referencing legal environment / assignment of benefits.
Willis Re divides the Florida property market mainly into three segments: ANTS, which are the Florida subsidiaries of US national companies, Florida Specialist companies, and Citizens.
Results for each of these segments reflect a severe underwriting loss for the year, with the Florida Specialist companies reflecting the highest combined ratio at 124.5%, including 2.2% of 1-year adverse loss development, compared to a combined ratio of 109.9% in 2019.
Willis Re’s report highlights how the solvency position of the Florida Specialist companies declined materially and remains just over double the NAIC’s risk-based capital Company Action Level of 200%.
Regardless, analysts say it would have been much worse if not for the infusion of capital to shore up their balance sheets in a number of cases.
During 2020, adverse loss reserve development in the US continued to be reported. Over the last 10 years, reported reserve development has trended from favorable to unfavorable.
The exception is Workers’ Compensation which has sustained favorable development as medical inflation in the US has moderated. Excluding WC, the US Casualty industry’s combined ratio was negatively impacted 6.5% in 2020 from adverse development.
Willis Re adds that social inflation in recent periods has driven an increase in propensity for claimants to litigate and, more impactfully, has increased the average size of litigated awards and settlements.
In addition to COVID-19 related reserve strengthening, some European (re)insurers reported adverse development of prior year liability claims, mainly for US business.
As in the US, analysts see the predominant concern as the uncertainty provided by social inflation, which is leading to some (re)insurers stating that they have added prudence to their reserving, typically in the form of increased IBNR.