David Flandro, Global Head of Analytics, JLT Re
Julian Alovisi, Head of Research, JLT Re
Following five consecutive years of falling rates, there was much speculation about how the market would react to 2017’s hurricanes, wildfires and earthquakes. To the surprise of some, the market responded with liquidity and stability.
There was no repeat of the price hikes that followed previous large-loss years such as 2005, which included hurricanes Katrina, Rita and Wilma (KRW).
Figures 1 and 2 show why KRW turned the property market while the losses of 2017 merely brought about moderate rate firming.
Although insured catastrophe losses were similar in both years, the effect on sector capital was far less in 2017 with only three (re)insurers losing a quarter or more of shareholders’ equity compared with at least 18 carriers in 2005.
Twelve of these eventually ceased trading as a direct or indirect result of 2005’s losses, something which is unthinkable in today’s market.