Insured cat losses in Q223 estimated to reach ~$17bn: Goldman Sachs

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Insured losses from major natural catastrophes in the second quarter of 2023 are estimated to reach ~$17 billion, Goldman Sachs has revealed.

Thunderstorm imageThis includes ~$13 billion from the US, driven by hail and severe convective storms over southern states and Texas.

The ~$17 billion loss is modestly above the 10-year Q2 average, analysts noted.

Goldman Sachs’ estimate is considerably higher than JP Morgan’s, who previously estimated that insured cat losses in Q223 will be less than $10 billion.

According to analysts, losses from hail storms impact personal lines carriers to a more “significant degree” as the impacts are generally to cars and the roofs of homes. This has already been demonstrated by the monthly catastrophe releases from both ALL and PGR, which pointed to CAT losses above average through April and May 2023.

Of the data used to aggregate catastrophe loss estimates, analysts stated that they have noticed the overall dollar value borne by insurers has increased majorly despite the count of weather events (accumulated by NOAA data) which implies a lower than average year.

Goldman Sachs attributed this towards two main factors: increased severity and rising loss costs contributing to larger payouts on claims from these storms, as well as changes in retention of secondary perils where reinsurers have borne the bulk of the losses over the past few years.

In addition, NOAA data indicates below quarter impacts for severe weather frequency for Q223, while April and June 2023 flag as higher than the five-year historical average impacts due to elevated hail, and both tornado and wind.

May was below the historical average across all three perils (hail, tornado, wind) contributing to total Q223 weather event frequency ~8% below the five-year historical average, driven by lower tornado and wind, offset by higher hail.

Analysts said: “These findings, however, were not consistent with the actual losses incurred we saw within the ALL and PGR monthly catastrophe releases, though the dollar value of the losses vs. the quantity of weather events can be reconciled when considering personal auto insurers are more susceptible to losses from hail, and increases in both severity and loss costs as well as changes in the retention levels borne by primary underwriters, which contributed to greater $ loss levels despite the lower count of weather related storms.”

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