Nat cat losses pile up in 2022
There’s been no let-up in nat cat events so far this year, with insured losses topping $10bn in the first quarter alone, for the sixth consecutive year.
It will be scant comfort to reinsurers that the loss events were at least well diversified, with Australia experiencing historic flood events on its east coast and western and central Europe taking hits from powerful windstorms - both in February.
In Japan in March, a USGS-registered magnitude-7.3 earthquake shook several prefectures, while in the US, Iowa and Louisiana suffered destructive convective windstorms – the first time that the month surpassed the 200-tornado threshold in the US.
Global temperatures and precipitation were heavily influenced by the continued effects of La Niña across the central and eastern Pacific Ocean, according to the Aon Catastrophe Recap Q1. These influences resulted also contributed to continuing severe drought conditions in parts of Africa, South America, and the western United States, and an earlier start to severe weather season in the US.
Aon said that for public and private insurers, the $36bn in Q1 weather-related insured losses in 2021 and 2022 represented the second-highest two-year total on record.
The sequence of European windstorms Dudley, Eunice, and Franklin over February 16-21 cost the insurance industry a total of around €4.0bn ($4.3bn).
The March 16 M7.3 earthquake that struck just offshore of Japan’s Fukushima Prefecture came five days after 11th anniversary of the Great Tohoku Earthquake (on March 11, 2011). Preliminary estimates put the insured loss at around $2bn. Three earthquakes of at least M7.0 intensity have hit in the region this year.
Torrential rainfall affected Australia’s East Coast from the latter half of February through March and well into the summer. The south-eastern Queensland and northern NSW floods in late February and early March, cost insurers A$4.8bn ($3.3bn).
Increased catastrophe loss activity continued to contribute to reinsurance demand growth, Aon’s mid-year reinsurance renewals report noted. The broker’s H1 Recap report noted nine separate billion-dollar insured loss events, compared with an average of seven. Insured losses during the first half of 2022 totaled $39bn, 18.2% above average, according to Aon.
Over the past decade, the ten-year average insured catastrophe loss has increased from $60bn to $95bn globally, Aon’s Impact Forecasting analysts reckon. Climate change projections will support further demand, Aon said citing S&P’s warning that reinsurers’ exposure to natural catastrophe risk could be underestimated by as much as 50%.
Reinsurers are under growing pressure from investors to reduce volatility of earnings, following large losses from secondary perils such as flooding, wildfires and convective storms. “Against the backdrop of climate change, increased frequency of difficult-to-model secondary perils, loss creep and litigation, were key considerations for reinsurers’ reduced risk appetite,” Aon said.