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AIR pegs aggregate annual global cat loss at average of $106.3bn

UPI 20171207

AIR Worldwide has pegged global, aggregate, average nat-cat losses at $106.3bn and cited the chance of a $200bn industry loss within the next 10 years at 40% or higher.

The firm’s latest Global Modelled Catastrophe Losses report included for the first time a figure for the 5% aggregate exceedance probability (EP) insured loss, or the 20-year return period loss, which was modelled at $203.4bn.

In adding the 5% EP loss, AIR acknowledged that it was “important to note that losses in excess of $200bn are a very real possibility in the shorter return periods”.

It follows criticism of stochastic models as being “pretty much meaningless” by Fidelis CEO Richard Brindle, in comments last month prompted by what he saw as modellers’ underbaked loss estimates for Hurricane Ida.

AIR's latest report showed the 1% aggregate EP loss, or 100-year return period, at $320.5bn. The estimated 0.4% aggregate EP loss, for the 250-year return period, was $397.0bn.

Key insured loss metrics october 25 2021 Insider red.PNG

Perils contributing to the loss figures included severe storm at 31%, tropical cyclone at 28%, crop losses at 14% and earthquake at 12%. Flooding accounted for 7%, wildfire 4% and terror 4%.

AIR also pointed out that global insured losses make up about one-quarter of global economic losses on average, based on 2020 dollars.

Put another way, global economic losses are about three times higher than global insured losses on average, at $320bn, when trended to 2020 dollars.

Insurance penetration is about 50% in North America, compared with 24% in Latin America and 12% in Asia.

Coverage for wind and fire is typically higher compared with flood and earthquake. Additionally, the report noted that inland flood insurance coverage is more widespread in Europe compared with the US.

The annual report, Global Modelled Catastrophe Losses, was based on AIR’s latest suite of models including new models and updates released during 2021, and updated industry exposure databases (IEDs).

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