With earthquakes devastating Japan and New Zealand, thunder storms and tornadoes cutting a swath of destruction across the Southeast U.S. and the Mississippi River now jumping it banks, the global insurance has seen no shortage of natural catastrophes in 2011.
A new report from
One of the more immediate impacts, the report states, will be apparent as July 1 approaches and reinsurance renewals are due.
“A.M. Best believes primary insurers could face higher reinsurance costs at the upcoming July 1 renewals, given first-quarter 2011 catastrophe losses sustained by global reinsurers and the release of a new version of Risk Management Solutions Inc.’s wind model, as companies evaluate the need for additional reinsurance protection.”
While the report notes the absence of hurricanes the past two years, it examines the decade long trend toward higher frequency and severity of weather-related events, especially tornadoes. While hurricanes have historically accounted for the bulk of insured catastrophe losses this has changed in recent years. “Severe thunderstorms, tornadoes and related weather events generated nearly 70% of natural catastrophe losses suffered by the U.S. P/C industry in 2010, for approximately $9.5 billion in insured losses, according to Munich Re,” the report states.
As hurricane season, the report says insurers cannot count on their luck holding as it has the past two years, noting that the U.S. has not had a three-year stretch without a hurricane landfall since the 1860s. “Forecasters are predicting an active Atlantic hurricane season in 2011, an indication that property writers may not be able to benefit as they did in 2009 and 2010 from another benign hurricane season.”
Whether or not a hurricane makes landfall this season, the report says the trend toward above-normal frequency and severity will introduce new degrees of volatility into property lines. “How insurers and reinsurers manage catastrophe programs for the remainder of the year will be influenced by pricing and availability of property catastrophe coverage, as well as emerging views of loss exposure and whether the rising frequency and severity of storms seen in recent years is now the norm,” the report states.
