The Intelligent Quarterly from the publishers of The Insurance Insider

Winter 2011 / 2012

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Although no knockout blow has been dealt to date, throughout 2011 (re)insurers have been bludgeoned by a steady stream of catastrophe claims that look set to make it the costliest year ever.

Click to enlarge By relying on their robust capital bases and strong underlying earnings, (re)insurers have faced a stiff test, but have been able to withstand the hail of blows - albeit with a few dishonourable exceptions.

Carriers have been subject to a total of four separate losses in excess of $15bn and a total major loss bill in the region of $100bn.

No comparable year exists for aggregate cat losses. Figures from Guy Carpenter place the loss in 2005 - when Katrina, Wilma and Rita hit the US coast - at $83bn, previously the biggest annual loss by some distance. According to the broker, the current cat loss total is $75.6bn, but this will be inflated significantly by the impact of the fourth quarter Thai floods.

The $30bn+ loss from Japanese quake was the biggest loss of the year and, in contrast to 2005, which was dominated by Katrina, it was a case of death by six or seven cuts.

Another distinctive feature of the year of the cat has been the remarkable geographical distribution of losses given the spread of exposure. Although nearly half of property cat premiums attach to US risks, according to Aon Benfield, and much of the rest to European countries, four of the biggest loss events took place in the Asia Pacific region. Guy Carpenter illustrated the mismatch by noting that 67 percent of cat losses this year came from Asia Pacific, despite only 15 percent of premiums being sourced from the region.

The year opened with a series of weather losses in Australia followed by a destructive earthquake in New Zealand in February, which demonstrated how formidably well-reinsured some primary carriers were.

While they were still reeling, (re)insurers were knocked again by a magnitude 9.0 quake that hit Sendai in the northeast of Japan, an event that has become the second biggest insured loss ever.

This was succeeded by a record-breaking string of tornadoes in the US, which spread the pain to the country's primary market.

Glossing over significant hits from Hurricane Irene and the Danish floods, this takes this survey up to the edge of the Thai floods, which were still taking place at the time of going to press.

This loss is the real wildcard for international cat writers and underlines - as New Zealand did - the capacity of very small premium-base countries to inflict disproportionately large losses.

On the positive side, for reinsurers at least, a November survey by RIMS/Advisen found that for commercial rates the average renewal premium increased by 2.1 percent in workers' compensation, 1.6 percent in property and 1.2 percent in general liability.

Meanwhile, an October report by the Council of Insurance Agents and Brokers said average US commercial P&C rates had increased 0.9 percent year-on-year. As the feature on page 17 indicates, reinsurers have grounds for hope that they can pass on rate increases for their own product onto primary carriers.

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