As bad as 2020 was, global insured catastrophe losses came in at relatively normal levels. The U.S. stands as a notable exception, however, with a large surge in hurricanes, wildfires, and other extreme weather events, according to a new Aon report.
Specifically, global insured catastrophe losses reached $86 billion for 2020, a result that hit “near average levels,” Aon said. In the U.S., insured catastrophe losses landed at $66 billion for 2020, something Aon pointed out was “significantly higher” than usual compared to the previous 10-year average of $46 billion.
Why were U.S. insured catastrophe losses so high? Aon blames a number of factors, including a record number of Atlantic hurricanes that made U.S. landfall, and lines of intense, widespread and fast-moving windstorms and thunderstorms that struck the Midwest. Massive U.S. wildfires also adversely affected the catastrophe results.
Hurricane Laura was the most expensive storm in the U.S., according to Aon, leaving $9 billion in insured catastrophe losses behind.
In sharp contrast, the rest of the Americas, the Asia Pacific region and Europe, the Middle East and Africa saw much less insured catastrophe loss activity. Aon said their estimated insured losses was about 50 percent of the average numbers that typically result.
Among other findings in the Aon report:
- Virtual market trading didn’t impact the reinsurance industry’s ability to efficiently trade through Jan. 1 renewals.
- By the end of 2020, capital raise for the market surpassed $23 billion, including $15 billion in equity and $8 billion in debt. More than 75 percent of the equity issuance went to existing market players even as new reinsurers launched with experienced leaders.
- Traditional reinsurance capital jumped $3 billion, ending at the 2020 third quarter at a new peak of $533 billion. That compares to the end of 2019 with $530 billion in traditional capital raised.
- Alternative capital remains below 2019 year-end levels through the 2020 third quarter, ending at $92 billion.
- Global reinsurer capital ended the 2020 third quarter at $625 billion, flat compared to the previous year.
- Collateralized reinsurance continued to decline in 2020, even as catastrophe bond issuance peaked in 2020, and sidecar/ILWs stayed stable.
- Reinsurance capacity should meet demand in 2021 for future renewals, and new capacity will enter the market.
- Expectations are that risk-taking strategies will evolve as COVID-19’s impact will become more transparent, and social inflation returns.
The full report is Aon’s Reinsurance Market Outlook for January 2021.