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Insurers experienced their costliest year for weather disasters in 2017, driven primarily by the losses caused by the hurricanes that devastated the United States and the Caribbean, according to a report published Wednesday by Impact Forecasting, Aon Benfield’s catastrophe model development team.
Insured losses from natural disasters in 2017 were among the costliest ever incurred by the insurance industry, including payouts by private insurers and public entities such as the National Flood Insurance Program and the Risk Management Agency’s Crop Insurance Program in the United States, according to the report. The $134 billion in payouts was the second highest on the inflation-adjusted record, just behind the $137 billion in insured losses in 2011.
In terms of insured losses resulting solely from weather disasters, 2017 slightly surpassed 2005 as the most expensive year ever recorded at $132 billion for the industry, according to the report.
“It is worth noting that the insurance industry was well positioned to handle the cost of the 2017 disasters,” the report said. “Global reinsurer capital was a record $600 billion at the end of third quarter 2017.”
About $80 billion, or 60%, of global insurance payouts related to hurricanes Harvey, Maria and Irma, according to the report. Harvey caused the most insured losses of any event in 2017 at $30 billion, followed by Maria at $27 billion and Irma at $23 billion. But the economic losses were far greater: about $100 billion for Harvey, about $65 billion for Maria and about $55 billion for Irma.
“Given these tropical cyclone events, the severe weather (convective storm) peril was not the costliest peril for insurers for the first time since 2012,” the report said. Severe weather, which references
convective storms, has been the costliest peril for insurers for 13 of the prior 18 years.
Outside of the three hurricanes, the most significant insurance event was the outbreak of wildfires in northern California, which has cost insurers at least $11 billion, according to the report. The economic cost of the wildfires, which destroyed more than 10,000 structures and killed at least 44 people, was pegged at $13 billion.
“This was by far the costliest wildfire outbreak ever recorded for the industry,” the report said.
Overall, 2017 was the costliest year for insurers for wildfire perils, with $14 billion in insured losses, according to the report.
The fifth costliest catastrophe event in 2017 was flooding in China in summer 2017, which caused only about $300 million in insured losses, but $7.5 billion in economic losses, according to the report.
Sixty-three percent of insured catastrophe losses occurred in the continental United States, according to the report.
An event must meet at least one of the following criteria to be classified a natural disaster: economic loss of $50 million, insured loss of $25 million, 10 fatalities, 50 injuries or 2,000 homes or structures damaged or filed claims, according to the report. Based on these criteria, there were at least 330 individual natural disaster events in 2017, which was 20% greater than the 2000-2016 average of 275.