At $35 billion, insured natural catastrophe losses in the first half of 2023 were roughly in line with historical averages, according to RBC Capital Markets.
“We estimate a large loss tally of $37 billion at the half-year, of which $35 billion are nat cat events with convective storms in the US comprising $25 billion of this,” analysts stated.
Adding: “Man-made losses in Q2 were not benign, but we believe the magnitude will not pose a risk to earnings in the quarter. Our $35 billion half-year tally is roughly in line with the 2012-22 average of $38 billion.”
It has been an active storm year to date, with the number of storms close to last year’s total.
The report found that the average economic cost per storm is in line with the long-term average (2006-22) and has a similar profile to last year.
Analysts said: “We hypothesise that wind events to date are an aggregation of many “low-cost” events which are likely to fall within primary retention levels. Retention levels have also been nudged upward, therefore insulating reinsurers from losses. That said, impact on attritional losses via primary operations and/or quota share policies are possible.”
The report noted that a benign Q2 will help realign the cat experience to budget at H1 following heavy losses from the Turkey/Syria earthquake experienced in the first quarter of the year.
“Our numbers assume a roughly normal FY load for 2023, where in some cases we reallocated unused budgets to 3Q as we head into hurricane season,” RBC’s analysts said.
“Looking at PMLs, we get an inkling who has a higher exposure to hurricane losses. While the proportion of PML to IFRS NAV gives us a good picture of shareholders’ equity at risk, we may be overstating this due to the impact of unrealized losses.”
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