International cat loss activity in 2020 well below annual average – CRESTA

International cat loss activity in 2020 was well below the annual average, according to CRESTA, the insurance industry organisation that provides a global standard for risk accumulation zones and cat industry losses.

CLIX, the CRESTA Industry Loss Index, provides industry loss data on international cat events (excluding US) which have generated industry losses in excess of $1billion. In the latest update, a total of 32 Cat events going back to 2017 were reviewed. Some 22 of these exceeded the CLIX capturing trigger and were consequently updated.

For 2020, CLIX is currently tracking seven cat events which generated a combined industry loss of $9.4 billion, a figure well below the long-term annual average. This benign international cat loss activity continued into Q1 2021 with only two events outside the US categorised as having the potential to exceed a $1billion industry loss. These include the Fukushima Mw7.0 Earthquake which occurred in Japan in February and the floods and storms which affected the Australian states of New South Wales and Queensland in March.

CRESTA said that looking along the entire CLIX Loss List, from 2000 to the present day, it is clear that recent loss activity is not an accurate guide to future losses. The 21-year time series, corrected for changes in insured values and asset prices, reveals that the annual average loss from major international cat events was $16.2 billion ($13.7 billion excluding the Tohoku Earthquake of 2011). Further, during this period, industry event losses of $2 billion or greater occurred on average twice a year, while in 2020 based on current information no international cat events have exceeded this loss level. Further actuarial analysis of the entire CLIX loss list also reveals that a $5 billion industry event loss can be expected to occur approximately once every 1.75 years, while a £10 billion loss may be reached or exceeded approximately once every four years.

Matthias Saenger, technical manager of CLIX, commented: “These results illustrate the actuarial analysis potential created by the CLIX Loss List, including the technical pricing of industry-loss-based risk transfer products. With our latest update, the list now contains 21 years of well-structured and independent industry loss data. Losses can be analysed by geography, time, or natural peril, with the insights gained applied to pricing and reserving activities, as well as capital management and reinsurance or retrocession buying.

“We are extremely pleased with the positive response from the global re/insurance industry to the establishment of CLIX. It is clear that there is strong demand in the marketplace for an independent source of well-structured and regularly updated industry Cat loss data.”

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