October 31st, 2017

Asia Pacific Catastrophe Report 2017: Executive Summary

Posted at 4:00 AM ET

cover-thumbA year marked by generally benign loss experience and few large catastrophe events meant that rates continued to remain positive for buyers in the Asia Pacific region throughout 2017. At the same time, the trend for steady growth in limit purchased continued. Much of the new limit purchased tends to be at the top of programs, and this feeds through to lower overall average rates on line (ROL), which is also reflected in the indices.

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The year 2017 will go down as one of worst ever for insured catastrophe losses. At the time of this writing, global insured catastrophe losses for the year were in excess of USD 100 billion, only the third time such a threshold was breached.

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Price movements in the reinsurance market followed both of the previous two annual periods that the USD 100 billion mark was exceeded, but it is important to note that in both cases the market was able to distinguish between loss generating and non-loss generating geographies.

Such a distinction may be of particular interest to buyers in the Asia Pacific region this year as they approach the 2018 renewal season. In 2005, the year of Katrina, Rita and Wilma, price increases were significant for U.S. buyers, but not so for buyers in the Asia Pacific region. The differential can be explained by the fact that 84 percent of 2005 losses stemmed from events in the United States, whereas less than 2 percent came from the Asia Pacific region. In 2011, the split was considerably different. Over 50 percent of the insured loss total came from Asia Pacific. In the latter case, Asia Pacific buyers faced price increases, whereas for U.S. buyers, increases were much less significant and driven primarily by a combination of localized severe storm losses and changes to the probable maximum losses generated in one of the main vendor models. For 2017, the split is more likely to resemble 2005 than 2011.

Reinsurers’ share of losses can vary greatly depending on the location where the original loss occurred. For 2017, the majority of reinsured losses emanating from the Asia Pacific region came from Australia, where buyers invested heavily in significant amounts of capacity. Nevertheless, reinsurers’ catastrophe loss ratios for the year to date from the Asia Pacific region are currently slated to remain under 100 percent for both 2016 and 2017, at 67 percent and 32 percent, respectively. These numbers compared favorably with the 900 percent-plus returned in 2011.

This report is available to Guy Carpenter clients. To request the report click here>>

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