Secondary perils take an increasing share of CAT losses
Source: Asia Insurance Review | Feb 2022
Secondary peril events are becoming more impactful and generating an increasingly large amount of insured losses, affecting the bottom lines of personal and commercial lines property underwriters, according to an AM Best commentary.
The commentary revealed that although the trends of more frequent and harmful catastrophes are a global issue, the US continues to suffer many of the most intense and most impactful natural disasters in terms of total damages and insured losses.
Additionally, demographic shifts and population growth in coastal or other areas that have proven to be catastrophe-prone have elevated the magnitude of economic and insured losses.
Early estimates of 2021 losses from natural catastrophes are higher than $105bn, which would make it the fourth-highest annual total since 1970. Over the last 40 years, a clear pattern of more frequent, significant natural catastrophe events has emerged, with the trend seemingly exacerbated in the last decade.
Insurance companies with exposures to these secondary peril risks such as wildfires, tornadoes and severe thunderstorms will face heightened enterprise risk management concerns.
In the near term, insurers could see higher insured losses from inflation that increases the value of exposed property, as well as continued demographic shifts to higher-risk geographies and aging building stock. The impact of these trends also is reflected in reinsurance pricing on primary companies, especially in loss-affected areas. A