Insured natural catastrophe losses for 2022 are estimated at between $105 billion and $120 billion, according to several sources, making it the third highest natural catastrophe loss year since 2011.
Willis Towers Watson’s Insurance Marketplace Realities Spring Update reports that property insurance premiums will continue to rise throughout 2023, but these increases will mostly be driven by inflation raising insurable values, as opposed to rate increases.
No single event caused this upswing, but rather an accumulation of catastrophes, which included hurricanes, floods, tornados and freezes, well exceeded the $70 billion average annual loss since 2011.
Secondary perils contributed significantly to the industry loss record yet again. These perils include flood, tornados, hail, extreme temperatures, winter storms and wildfires. The frequency and magnitude of these loss events are an increasing component of loss costs that must be priced for.
The report finds that the “new normal” of more frequent climate change-related natural disasters could render current catastrophe modelling out of date. Other factors include the severe supply chain issues brought about by the pandemic, from availability/price of materials, a shocking shortage of skilled workers in the labour market and longer-duration business interruptions.
Double-digit rate increases are however likely for challenged occupancies such as forest products, metals, waste management, food and beverage, and insureds with losses, protection challenges or cat exposures, as underwriters continue a highly discriminating approach to risk selection and pricing.
Valuation of assets used to produce a schedule of values will be the marquee issue for property insurance buyers this year. Without proper valuation, insureds may find themselves underfunded for retained risk, not properly purchasing adequate catastrophe cover or setting sublimits improperly for key coverage elements.