A recent study on catastrophes published by Aon revealed that 2017 was the second costliest year on record for insured and uninsured losses, and will most likely become the record year for insured losses with further loss development from Hurricanes Harvey, Irma and María.
In terms of economic losses due to weather-related disasters alone, 2017 became the most expensive year recorded, with an estimated total of $344 billion in losses, according to the “Property Market Dynamics 2019” report.
During the 2017 and 2018, the Americas region experienced one of the most active disaster-related years in history, due to an intense mix of hurricanes, earthquakes and forest fires.
Other major catastrophes in the region were the earthquake in Mexico and the forest fires in California. Globally, floods in Asia and droughts in Europe also caused huge economic losses, the report noted.
“Having global climate catastrophes in perspective is important because this type of event alters the premiums of catastrophic reinsurance worldwide,” said Mariel Maldonado, commercial risk practice leader of Aon, Puerto Rico.
“In our case, even being an American territory, Puerto Rico is considered part of the Latin American and Caribbean region in all insurance companies,” he said. “Therefore, everything that happens in Mexico, Chile or Argentina, impacts directly on the cost of property insurance, both residential and commercial.”
“For example, after hurricanes Irma and María, we saw increases in premiums, and we can expect rates to continue to rise. In addition, now insurers are asking for more information at the time of the claim,” the executive said.
Although during the first three months of 2019 there were only $7.1 billion in sustained losses — a figure that is 47% below the average on record since 2014 — the losses of 2017 and 2018 continue to impact the estimates for this year and the market’s long-term behavior.
“So, while 2018 was a manageable insured loss year, against the backdrop of record 2017 insured losses and four plus years of preceding rate decreases, it presents challenges to insureds that have contributed losses to the insured loss landscape,” the report stated.
But despite the turbulent times, the insurance industry remains better prepared to withstand global catastrophic losses through the all-time high policyholder insurance surplus of more than $740 billion, according to the report.
Knowing how these catastrophic events — which are reported globally — have serious implications on insurance coverage for organizations is essential to better understand insurance programs, their risks and the exposures that companies could face.