Insured losses in Q4’23 below average, says JP Morgan

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JP Morgan’s Love Actuary note on the fourth quarter of 2023 reveals a relatively optimistic outlook for the reinsurance industry, supported by a slightly below-average level of natural catastrophe losses during the period.

J.P MorganThe financial giant estimates global insured losses from nat cats for 4Q 2023 to be in the range of $8-10 billion, making it a lighter-than-average quarter.

Historically, the average insured losses in the fourth quarter have been around $10 billion over the 21st century.

A significant contributor to these losses was Hurricane Otis, which devastated Southern Mexico, causing estimated insured losses of $3-6 billion, according to Verisk estimates.

Looking at the broader scope, JP Morgan forecasts total insured losses for 2023 to be in the range of $90-100 billion, positioning the year as lighter in losses compared to the preceding three years where losses consistently exceeded $100 billion.

The report attributes over 50% of the losses during the year to severe convective storms (SCS) in the United States.

Swiss Re estimates indicate that US SCS activity surpassed $50 billion in 2023, marking the first time such a significant impact has been recorded. Other major contributors to the losses include earthquakes in Turkey and Syria, Maui wildfires, and Hurricane Otis in Mexico.

JP Morgan remains positive about the reinsurance sub-sector. The report cites a robust backdrop and rate adequacy compared to conditions in 2022 and earlier. Early reports on January renewals from brokers suggest that market firmness has continued, although the rate of price increases has been less dramatic.

Analysis by Swiss Re, one of the world’s largest reinsurers, reveals that nat cats will once again break several loss records this year, as a high frequency of low single-digit billion-dollar loss events take insurance and reinsurance industry losses above the $100 billion mark for the fourth consecutive year.

Economic losses from both nat cat and man-made events in 2023 is estimated at $269 billion by Swiss Re, which is around 9% lower than in 2022, but above the previous 10-year average of $235 billion. Of this, the large majority, or $260 billion relates to nat cat events, with $9 billion coming from man-made events.

According to a new report from Munich Re, thunderstorms in North America and Europe in 2023 were “more destructive than ever before”, driving overall losses of $76 billion, and insured losses of $58 billion.

The reinsurer observed that such high thunderstorm losses have never been recorded in the USA or Europe.

“Assets worth around $66bn were destroyed in North America, of which $50bn was insured, while in Europe the figure was $10bn (€9.1bn), of which $8bn (€7.3bn) was insured,” Munich Re explained.

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