Multiple cat event years to become new norm: Swiss Re
Last year was the worst on record for catastrophe losses, but (re)insurers must be prepared for the possibility of more frequent multiple-disaster years in future, according to a Swiss Re report.
Swiss Re's latest Sigma report found that global insured cat losses totalled $144bn last year - the highest level since the reinsurer began collecting records in 1970.
The loss figure also greatly exceeds the annual average of $58bn for the prior decade.
Driven largely by hurricanes Harvey, Irma and Maria (HIM) and the Californian wildfires, the 2017 loss tally was more than double the $56bn recorded in 2016.
Total insured losses arising from HIM came to $92bn. Of this, Maria caused $32bn in losses, while Harvey and Irma each caused losses worth $30bn.
Almost all Lloyd's insurers reported an underwriting loss for 2017, citing the freak year for cats for their lacklustre results, despite claims that overcapacity and lack of pricing discipline were also to blame.
However, Swiss Re said 2017's run of disasters was not as rare as has been assumed and warned that carriers must prepare for future multiple-cat years.
The report said while the HIM hurricanes were each uniquely destructive, there have been five years in the last hundred in which at least four Category 4 or 5 hurricanes occurred in the North Atlantic, with 2005 being the most recent.
Swiss Re said data now pointed towards hurricanes clustering when certain conditions align, such as increased sea surface temperature and atmospheric humidity, and that with temperatures set to continue rising due to climate change, more storm clustering is likely.
"Hurricane clustering has emerged as an as-important variable to consider in assessing future loss potential scenarios," the report said.
Last year was also the costliest for wildfires since records began. Globally, wildfires caused $14bn of insured losses, of which $13bn stemmed from the Californian fires.
The October outbreak in eight northern Californian counties caused $10.9bn in insured losses. Within that outbreak, the Tubbs fire in Sonoma and Napa counties was the costliest fire on Sigma records, causing $7.7bn in insured losses.
In Canada, more than 1,300 wildfires burned 1.2 million hectares of land in British Columbia, making 2017 the province's worst wildfire season on record in terms of area affected.
Although the Californian fires were particularly ferocious thanks to prolonged dry conditions in the state, Swiss Re said the increase in wildfire losses generally was due to ongoing trends such as increasingly long, hot and dry summers and house-building in at-risk areas.
Since 1990, 60 percent of new US homes have been built in regions next to or within undeveloped natural areas, which are more susceptible to wildfire.
"The very large and growing scale of wildfire losses highlights the importance of increasing resilience through planning, building practices and exposure reduction," the report said.