Contentsthoughtleadership.aon.com/Documents/20210105-rmo-january.pdf · 2021. 1. 14. · Only three...

2 Reinsurance Market Outlook

Contents Executive Summary: Calm Amid the Storm 3

Global Reinsurer Capital 4

Capital recovers to pre-pandemic levels 4

Traditional capital 4

Capital raising in 2020 7

Lloyd’s update 9

Alternative capital 10

Capacity outlook 13

Demand Upticks Slightly As Unique Market Dynamics Dictated Individual Lines and Segments Outcomes 14

Property 14

Casualty 15

2020: Near Average Year for Natural Catastrophe Losses Despite Record-Breaking Atlantic Hurricane Season 17

Contact Information 20


Executive Summary: Calm Amid the Storm Despite record-setting hurricane landfall in the U.S. and uncertainty about the impact of COVID-19 in some lines, the reinsurance market operated in an orderly and efficient manner for January renewals. Virtual market trading did not impact the industry’s ability to efficiently trade through the major reinsurance renewal date of the year. New capital raises and primary market pricing trends mitigated further market dislocation as renewals evolved through January 1 despite recent years earnings results, U.S. catastrophe loss activity and interest rate challenges for reinsurers.

Through year end, the market saw capital raise over USD23 billion, split circa USD15 billion in equity and USD8 billion in debt. While the industry saw new reinsurers develop with experienced leadership teams, more than 75 percent of the equity issuance went to existing market players. Traditional capital overall increased USD3 billion ending Q3 at a new peak of USD533 billion compared to 2019’s year end of USD530 billion. Despite regaining some ground since Q2, alternative capital remains below 2019 year-end levels through Q3 ending at USD92 billion. Collateralized reinsurance continued to decline over the period while catastrophe bond issuance saw its peak in 2020, and sidecar and ILWs remained relatively stable. In total, global reinsurer capital ended Q3 2020 flat at USD625 billion. While capacity is expected to meet demand for future renewals and new capacity will likely enter the market in 2021, risk-taking strategies will evolve as the impact of COVID-19 becomes more transparent and the potential return of social inflation looms.

Demand renewed slightly up for the industry at January 1 with mixed rate change outcomes across programs. Much discussion centered on contract language, most notably for communicable disease language as the market worked to determine the exposure to individual placements.

Global insured catastrophe losses ended 2020 at near average levels of USD86 billion. The United States experienced significantly higher insured losses of USD66 billion for 2020 compared to a prior 10-year average of USD46 billion. A record breaking number of U.S. landfalls during the Atlantic Hurricane Season, Derecho activity in the Midwest and another costly year for U.S. wildfires all contributed to the outcome. The largest insured loss event for the season was Hurricane Laura estimated at USD9 billion. The rest of the Americas, APAC and EMEA conversely saw less activity with an estimated insured loss circa 50 percent of average in all regions.

Note: This reinsurance market outlook report should be read in conjunction with our firm’s views on rate on line, capacity and retention changes for each cedent’s market. Our professionals are prepared to discuss variations from our market sector outlook that apply to individual programs due to established trading relationships, capacity needs, loss experience, exposure management, data quality, model fitness, expiring margins and other factors that may cause variations from our reinsurance market outlook.


Global Reinsurer Capital Capital recovers to pre-pandemic levels Aon estimates that global reinsurer capital returned to its pre-pandemic high of USD625 billion by the end of September 2020, driven by continued capital market recovery and new equity issuance. This calculation is a broad measure of the capital available for insurers to trade risk.

Exhibit 1: Global Reinsurer Capital

Sources: Company financial statements / Aon Business Intelligence / Aon Securities Inc.

Traditional capital

Traditional equity capital rose by USD3 billion to a new high of USD533 billion over the nine months to September 30, 2020, aided by a capital market rebound in the second and third quarters and around USD10 billion of new issuance. Reinsurer earnings were generally down on the prior year, driven by the impact of COVID-19 on both sides of the balance sheet, as well as a continuing high frequency of natural catastrophe losses.

511 493 514 516 488 530 533

64 7281 89 97

95 92-2% +5%

+2% -3% +7%

575 565 595605 585

625 625

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100

200

300

400

500

600

700

2014 2015 2016 2017 2018 2019 9M 2020

US

D (b

illion

s)

Traditional capital Alternative capital Global reinsurer capital


Exhibit 2: Reinsurer Results*

Source: Company financial statements / Aon Business Intelligence * Based on Aon’s Reinsurance Aggregate

Eighteen constituents of Aon’s Reinsurance Aggregate (‘the ARA’) reported results for the nine months to September 30, 2020. The net combined ratio across this group stood at 102.9 percent, with losses relating to COVID-19 and natural catastrophe events contributing 7.9 and 4.7 percentage points, respectively.

Exhibit 3: 9M 2020 Net Combined Ratios by ARA Constituent

*P&C Re only Source: Company financial statements / Aon Business Intelligence

0%10%20%30%40%50%60%70%80%90%

100%110%120% Disclosed COVID-19 Losses Disclosed Nat Cat Losses


Technical results in life and health reinsurance business were impacted by another USD1.4 billion of COVID-19 related losses. Investment returns were lower across the board, with two constituents still reporting negative total yields, despite the capital market recovery since the first quarter. In the aggregate, net income stood at USD2.6 billion, with eight companies reporting overall losses. Individual results are shown below.

Exhibit 4: 9M 2020 Net Income by ARA Constituent

Source: Company financial statements / Aon Business Intelligence Across the 18 ARA constituents that reported, total equity was flat in U.S. dollar terms. However, 10 companies reported reductions in original reporting currencies, as shown below. The sizeable increase at RenaissanceRe was driven by just over USD1.1 billion of new equity issuance in June.

Exhibit 5: Year-to-Date Movement in Total Equity (Original Reporting Currency)

Source: Company financial statements / Aon Business Intelligence

-750

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1,250

-15%

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The exhibit below shows the capital sensitivity of the 18 ARA constituents to disclosed pre-tax COVID-19 and natural catastrophe losses in the first nine months of 2020. In many cases, actual post-tax impacts will be significantly lower than this chart implies.

Exhibit 6: Disclosed Pre-Tax Major Losses in 9M 2020 Relative to Opening Total Equity

Source: Company financial statements / Aon Business Intelligence In terms of valuation, the ARA ended the year trading at a trailing price-to-book ratio of around 1.1x. The aggregate stock market value of the 21 listed constituents fell by 16 percent during 2020, representing a significant recovery from the extreme capital market volatility seen earlier in the year.

Exhibit 7: ARA Share Price Performance in 2020

Source: Bloomberg, as of December 11, 2020

Capital raising in 2020 Aon tracked USD23.6 billion of reinsurance related capital raising in 2020 comprised of USD15.4 billion in equity and USD8.2 billion in incremental debt. The new equity was split 75 percent to established companies and 25 percent to a handful of new start-ups, the so-called ‘Class of 2020’.

0%2%4%6%8%

10%12%14%16%18%

COVID-19 losses NatCat losses


Exhibit 8: Reinsurance Related Capital Raising in 2020

Source: Company financial statements / Aon Business Intelligence Only three start-ups were active in time for the January 1, 2021 renewals: Vantage, Conduit and Inigo. Brief details are provided below. Additional new capacity is expected to come onstream in the early months of 2021, notably from Lavant (led by James Slaughter).

Exhibit 9: New Capacity at January 1, 2021



Lloyd’s update Lloyd’s reported gross written premium of GBP20.0 billion for the first half of 2020, which was flat at constant exchange rates. Average risk-adjusted rate increases of 8.7 percent were offset by the impact of syndicates exiting or re-underwriting certain classes, or curbing risk appetite in under-performing areas.

The market reported an underwriting loss of GBP1.3 billion, representing a combined ratio of 110.4 percent. Pandemic-related claims were reserved at GBP2.4 billion net of expected reinsurance recoveries, with another GBP0.6 billion expected to be booked in the second half of the year. The underlying combined ratio of 91.7 percent was close to the targeted level.

Net investment income fell by 59 percent to GBP0.9 billion and Lloyd’s reported an overall pre-tax loss of GBP0.4 billion for the period. A profit of GBP1.9 billion would have been reported without the impact of COVID-19 claims.

Net resources rose by 7 percent to GBP32.8 billion at June 30, 2020, with the GBP3.0 billion of ultimate expected COVID-19 losses already funded via two accelerated market-wide capital collections. Funds at Lloyd’s rose by 6 percent to GBP29.4 billion, while the Central Fund stood at GBP2.8 billion.

Improving underwriting conditions resulted in a smoother business planning process for 2021, but the drive for sustainable long-term profitability took precedence over growth. Loss-making classes and syndicates remained under heavy scrutiny, but Lloyd’s also looked to support the ambitions of strong performers. The net effect was greater differentiation of syndicate supervision.

Exhibit 10: Business Planning for 2021 – Key Issues

Source: Lloyd’s / Aon Business Intelligence The approved plans will allow the market to write gross premiums of GBP41.2 billion (USD54.9 billion) in 2021. This represents growth of 6 percent compared with the approved plans for the prior year, but the increase is 13 percent relative to the premium volumes syndicates are expected to write in 2020.

The total capital required to support 2021 plans has increased by 12 percent to GBP23 billion. However, the increase was only 2 percent excluding exposure changes and COVID-19 loss impacts.


All plans will be subject to a full review during the first quarter of 2021 to ensure they have been stress-tested for COVID-19 impacts. The focus will be on any recessionary considerations that might apply to casualty lines.

Exhibit 11: Business Planning for 2021 – Main Outcomes

Source: Lloyd’s / Aon Business Intelligence

Alternative capital Assets under management in the alternative capital sector fell by an estimated 4 percent to USD92 billion over the nine months to September 30, 2020. Approximately 60 percent of the total was controlled by the 10 largest ILS fund managers, as shown in Exhibit 6.


Exhibit 12: Leading ILS Fund Managers

Source: Company financial statements / Aon Business Intelligence Some of the assets supporting collateralized reinsurance contracts are trapped, due to the ongoing uncertainty surrounding the ultimate extent of recent major losses, now including COVID-19. As a result, the funds available for deployment are somewhat lower than the headline figures suggest.

Recent years have represented a significant test of investor appetite for insurance risk. Many supporters of sidecars and collateralized reinsurance transactions experienced significant losses, with returns further diluted by trapped collateral. Concerns around model credibility, loss creep and climate change have caused some to leave and others to pause, resulting in an overall reduction in assets under management.

Exhibit 13: Alternative Capital Deployment

Source: Aon Securities Inc.

Manager Ownership Assets under management at September 30, 2019 ($bn) Assets under management

at September 30, 2020 ($bn) Nephila Markel 10.4 9.4

LGT LGT 6.8 8.0 Fermat Fermat 6.8 7.5

Leadenhall MS&AD 5.7 6.2 RenRe RenRe 5.0 6.0 CS ILS Credit Suisse 7.2 5.8 Securis Securis 5.7 4.7

AlphaCat AIG 4.3 4.3 Stone Ridge Stone Ridge 5.5 4.1 Elementum Elementum 4.2 4.1

Aeolus Elliott Capital 4.0 4.0

Total 65.6 64.1

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2002 2003 2004 2005 2006 2007 2008 2009 2010 2011 2012 2013 2014 2015 2016 2017 2018 2019 9M2020

Lim

it (U

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Cat Bonds Sidecars ILWs Collateralized Re


New inflows of alternative capital tended to favor established managers with strong track records. Several leading reinsurers successfully attracted additional support from third party investors during 2020, notably RenaissanceRe and Swiss Re.

Trapped collateral significantly impacted the retrocessional market in recent years, but new capacity emerged towards the end of 2020, with the launch of two new collateralized players (Integral and Acacia). Improved terms increased the appetite of certain traditional players.

One area of the alternative capital sector that continues to perform strongly is the property catastrophe bond market, where the liquidity and peril-specific nature of the product continues to attract strong investor demand.

Exhibit 14: Property Cat Bond Issuance

Source: Aon Securities Inc. Limit placed reached a record level of USD10.9 billion in 2020, with most bonds priced towards the low end of expected ranges and upsizing during the placement process. Investors expressed preference for per occurrence rather than aggregate triggers, given recent loss activity from high frequency secondary perils.

The higher cost of ultimate net loss retrocession coverage resulted in several reinsurers turning to the property catastrophe bond market for protection in 2020, usually on an indexed basis. The total limit sponsored by each company during the year is summarized below.

500 716 575 3001,015 1,343 520

1,210 1,4942,015 1,970

3,380

1,449

3,7553,955

1,794810

2,300 592

2,095 3,303

4,4922,652

800

6,378 4,029

1,690

2,7481,356

320

411

232

674

529

1,441

250

650

925

4601,550

7422,048

0 1,600

2,0181,990

1,888

1,877

2,075

1,425

1,850

1,353535

2,244

3,663

0

2,000

4,000

6,000

8,000

10,000

12,000

2007 2008 2009 2010 2011 2012 2013 2014 2015 2016 2017 2018 2019 2020

US

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Q1 Q2 Q3 Q4


Exhibit 15: Reinsurer Sponsors of Property Cat Bonds in 2020


Capacity outlook After a difficult start to 2020, it is estimated that subsequent capital-raising activity left the global supply of reinsurance capacity broadly unchanged at the end of the year. Supply is sufficient to meet foreseeable reinsurance demand, but it is likely to be deployed at better terms than have prevailed previously.

The principal driver of the tightening market conditions is poor reinsurer earnings since 2017. Over the last five years, the combined ratio and return on equity for the ARA averaged around 101 and 5 percent, respectively, resulting in growing external pressure from investors and rating agencies.

Another driver is the ongoing uncertainty around the ultimate cost and distribution of COVID-19 losses. Lloyd’s has maintained its position that the eventual gross claims burden will exceed USD100 billion, whereas reported net losses across the industry aggregated to less than USD30 billion at September 30, 2020.

The threat of social inflation to casualty reserves presents a second area of uncertainty. Underlying loss trends are deteriorating and COVID-19 is likely to have exacerbated the situation. The practical effect is that prior year reserve releases will provide more limited support to reported earnings going forward.

Other headwinds to 2021 performance include recessionary pressures on premium volumes, higher costs of retrocession protection and historically low interest rates.

Against this backdrop, risk appetites are changing. Argo’s sale of Ariel Re, Markel’s decision to conduct all property catastrophe reinsurance underwriting via Nephila, and the cessation of underwriting at Kelvin Re and Humboldt Re are all reactions to volatility.

To the industry’s credit, it has shown continued resilience in 2020 and many reinsurers ended the year positioned to grow in 2021 and beyond. Additional new capacity expected to come on-stream in the early part of the year will help to mitigate the expected pressure on reinsurance terms.

Cedent Series Risks / Perils covered Size ($bn)Swiss Re Matterhorn Re US named storm 1,360

Fidelis Herbie Re US named storm, US EQ 400RenRe Mona Lisa Re US named storm & EQ, Canada EQ 400

Brit Sussex Capital US named storm, US EQ 300Convex Re Hypatia US named storm, US & Canada EQ 300

Liberty Mutual Mystic Re US named storm, US EQ 300Allied World 2001 CAT Re US named storm, US & Canada EQ, US thunderstorm, Euro wind 210SCOR SE Atlas Capital US named storm, US & Canada EQ 200

Allianz Risk Transfer Blue Halo Re US named storms 175AXIS Northshore Re US named storms, US & Canada EQ, Euro wind 150

Hamilton Re Easton Re US named storm, US EQ 150Hannover Re 3264 Re US named storm, US & Canada EQ, Euro wind 150Achmea Re Windmill II Re European windstorm 113

Markel Stratosphere Re US named storm, EQ, winter storm, thunderstorm 100Total $4.3bn


Demand Upticks Slightly as Unique Market Dynamics Dictated Individual Lines and Segments Outcomes Insurers continue to benefit from an active market for trading risk across all major lines and segments despite continued scrutiny of coverage language for evolving risks, namely communicable disease and cyber. Across most geographies and lines, January 2021 renewals had ample supply available through existing reinsurers looking to grow and new market players on a traditional and alternative market basis. The following table summarizes January renewals’ unique dynamics in the macro property and casualty risk transfer space.

Property

Topic / Issue Commentary Contract Advocacy • Client contract language was a part of virtually all renewals (namely

communicable disease and cyber exclusions). Some customization of these clauses was available to fit with insurer exposure. No broad, single wording was adopted.

• Other terms and conditions saw minimal pushback from the market.

Underwriting Approach

• Incumbent reinsurer expectations for payback on loss impacted accounts were met with a more technical underwriting approach from new capital.

• As expected, quote spreads widened at renewal on the back of macro-economic impacts for the market and ceded loss activity throughout 2020. Clear and upfront communication by reinsurers on pricing and capacity for loss impacted accounts was appreciated by insurers. Quotes on individual placements that represented increases out of line with the broader market and with minimal reinsurer messaging met significant push back from cedents. Reinsurers with an orderly approach to pricing, capacity and communication benefitted as final lines were determined.

New Capital Composition

• Unlike in recent years, the market leading into January 1 experienced a substantial influx of new capital from existing and newly formed carriers led by seasoned (re)insurer leadership.

• A few unique dynamics were present for the new capacity at January 1 market including a focus on a more holistic approach to supporting cedents across all layers of programs as well as a renewed focus on the value of trading relationships. While alternative capital provides needed capacity with its own unique approach, the new traditional capacity doubled down on long-term market staying power and active marketing to cedents and brokers to develop business.

Coverage Types • Aggregate: Despite continued focus on price, capacity remained available on aggregate structures for January renewals. Buyers with a consistent approach to aggregate purchasing experienced success, albeit with some adjustments to terms. Existing markets in the segment continued to provide coverage as some new markets also looked to play in the space.


• Cascading coverage: Although tougher to secure in peak zone Florida, cascading coverage was more readily available in non-peak zones at January 1.

Retentions / Retained Losses

• Publicly traded companies continued to evaluate structure options that provided valuable earnings protection. However, these purchases continue to be price-sensitive. In some instances, cedents looked to restructure or buy less aggregate due to pricing, however overall retentions remained relatively stable.

• Mutual insurers showed less overall appetite for higher frequency layers as expense management and capital preservation trumped earnings protection.

• Tempered reinsurer appetite for higher frequency layers led to a stronger consideration by cedents to increase net retention, while some cedents also explored lowering retentions and sideways covers to protect earnings. Overall, retentions remained relatively stable.

Casualty Topic / Issue Commentary Communicable Disease (COVID)

• Casualty claims remain relatively limited, despite abundance of caution notices across various lines of coverage.

• The reinsurance market is not conforming to a single LMA contagious disease exclusion and there is room for negotiation in nearly every line of business. Clear presentation of client exposures and underwriting approach are key to the best outcomes.

Social Inflation • COVID-19 environment has slowed or stopped courts, which appears to be suppressing social inflation temporarily as plaintiffs may be more willing to settle for less and often earlier on some cases. Others are simply delayed. There will likely be heightened social inflation pressure as the economy and courts fully reopen.

Cannabis • Additional states have legalized cannabis and pressure is building at the federal level, keeping this class under a watchful eye for most carriers.

Cyber • Deeper analysis of portfolios and loss trends resulted in a more thoughtful approach to the cyber underwriting process. It also allowed some reinsurers to be creative with capacity and structures.

• Ransomware was a key consideration for renewals. Insurers had a better outcome when they demonstrated a clear understanding of the impact of ransomware on their portfolios including 1) industry segments most impacted 2) the revenue band 3) the range of ransom demands, and 4) the cyber security gaps that are driving the claims.

State of the LPT/ADC Market

• Demand for adverse development and run-off protections remains high, as companies look to free up capital, largely to redeploy in the improved casualty marketplace.


• Reinsurer interest is most robust for run-off transactions, but remains strong for nearly all types of historical liabilities

Clash / Contingent / Systemic

• Pandemic has brought definitions of loss to the forefront. Clients desire the broadest coverage possible and the market is evaluating coverage and price balance. Capacity remains where pricing and coverage are aligned.

Insurance Rate Increases

• Primary rate increases are supporting the reinsurance market quite well on professional lines, commercial auto and excess casualty. Reinsurers are benefiting from significant rate uplift in nearly every casualty insurance line and primary rate increases are serving to offset significant reinsurance pricing pressure from reduced yield curves.

• On lines most heavily impacted by social inflation, rate increases are now compounding year over year. Insurers are capitalizing on market capacity constraints while balancing questions around prior years and long-term profitability.

Silent Cyber • The Lloyds requirement to address silent cyber in 2021 is posing more questions than answers at this point. With Lloyds’ stricter stance on both communicable disease and silent cyber, it could result in lower demand for coverage from this supply segment.

Impact of New Capital

• New capital did not have a large impact on January reinsurance placements. More interest was seen from reinsurers who allocated additional capital to casualty lines of business for 2020 renewals given prevailing insurance pricing.

• New capital is entering the excess casualty, directors and officers, and management liability insurance space via carriers and MGA operations. Existing capital is also expected to explore the segment in 2021.

Data Quality / Back to Underwriting

• Reinsurers are asking more questions on data and underwriting approaches than in recent years. Complete and transparent submissions are generally garnering more capacity and/or better terms.


2020: Near Average Year for Natural Catastrophe Losses Despite Record-Breaking Atlantic Hurricane Season Global natural catastrophe losses in 2020 were higher than those incurred in 2019, but essentially on par with losses seen in the previous decade. The USD86 billion in payouts by the private insurance industry and government-sponsored programs marked the fifth consecutive year which they have topped at least USD60 billion on an inflation-adjusted basis; the first time this has happened on record for the industry. Only six years have ever topped USD80 billion and all have occurred since 2005. The losses were driven by a highly active year for severe convective storms in the United States, plus a record-setting number of U.S. landfalls during the Atlantic Hurricane Season and another costly year for U.S. wildfires.

Exhibit 16: Insured Losses by Year by Type

The USD86 billion (preliminary and subject to change) was near the 10-year average of USD87 billion. The fact that the near-term average now exceeds USD80 billion highlights how active it has been for the industry, but as the rest of the Reinsurance Market Outlook shows, the industry has been well positioned and capitalized to manage these elevated costs. When analyzing the 2020 annual loss in relation to the 10-year median, the value was 17 percent higher (USD73 billion). Median analysis provides a different and more accurate depiction of disaster losses and helps to minimize any skew from outlier data or extreme volatility on a year-to-year basis.

While the United States is often the dominant regional driver of industry losses, 2020 was even more prolific in this regard. More than three-quarters of all private or public insurance losses occurred in the U.S., most of which were tied to severe convective storm, tropical cyclone or wildfire events. Asia-Pacific (APAC) was second at 11 percent, Europe, Middle East and Africa (EMEA) was third at 7 percent, and the Americas (Non-U.S.) last at just 4 percent.

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Tropical Cyclone Severe Weather Flooding Earthquake EU WindstormWildfire Winter Weather Drought Other

Source: Aon Reinsurance Solutions


Exhibit 17: Insured Losses by Region

The two costliest perils of 2020 were severe convective storm and tropical cyclone, which together accounted for roughly USD60 billion (or nearly 70 percent) of the year’s payouts. The most expensive individual event was Hurricane Laura (tentatively listed at USD9 billion). The August storm was one of five named storm or hurricane landfalls that occurred in the U.S. state of Louisiana in 2020 and caused extensive damage to residential and commercial property in the greater Lake Charles region. Perhaps the most locally substantial event occurred on August 10 in the U.S. Midwest. One of the most destructive derecho events on record resulted in more than USD5 billion in insured property and agricultural damage across the hardest-hit states of Iowa and Illinois. A “derecho” is a long-lived, fast-moving cluster of thunderstorms defined by non-tornadic damaging winds.

While an expensive year for insurers, this did not directly translate into major payouts by reinsurers. Despite the high costs from thunderstorms and tropical cyclones, the frequency of the events played a bigger role than the cost of individual events. This means that a higher volume of medium-sized insurance events did not lead to a significant portion of those costs being ceded by reinsurers since written triggers were not met. It remains to be seen whether the increased frequency of these medium-sized events leads to more aggregate excess cover in the future that would allow insurers more protection.

Beyond the United States, some of the most significant thunderstorm-related costs were incurred in Australia and Canada. Major metro areas including Sydney, Brisbane, Melbourne, and Calgary were all affected by billion-dollar events in 2020.

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Americas APAC EMEA United States

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2020 10 Year Avg. 10 Year MedianSource: Aon Reinsurance Solutions


Severe convective storm and tropical cyclone had the greatest losses and highest costs in 2020, indicative of an ongoing trend. SCS has been a higher loss year than tropical cyclone for the re/insurance industry in 22 of 31 years since 1990. Tropical cyclone payouts tend to show tremendous volatility on an annual basis. Major spikes in years such as 2004, 2005, and 2017 skew the mid- and long-term averages for the peril, since the highest tropical cyclone years are higher than those of SCS, but it masks the underlying fact that SCS has much more annual consistency. The standard deviation for SCS during 1990-2020 is USD9 billion. This compares with a much higher USD28 billion for tropical cyclone.

Exhibit 18: Annual Global Severe Convective Storm & Tropical Cyclone Insured Losses

The biggest takeaway from 2020 for these perils is that the frequency of events is not always directly correlated to incurred losses. This is especially the case with the tropical cyclone peril, where the location and intensity of events is a much more substantial driver of losses. Using the 2020 Atlantic Hurricane Season as an example, the United States had a record number of named storm landfalls (12), including six hurricanes. Most of those landfalls entirely missed the highest density population centers along the U.S. East Coast, which helped minimize damage costs. Similar storm landfalls in less densely exposed areas of Japan, South Korea, and the Philippines kept local industry impacts lower than they could have been. While 2020 was a very active and costly year, it could have been worse.

To find the most up-to-date global catastrophe loss data for 2020, and other historical loss information, please visit Aon’s Catastrophe Insight website: http://catastropheinsight.aon.com.

Impact Forecasting’s Weather, Climate and Catastrophe Insight: 2020 Annual Report will be released in late-January 2021 and include a comprehensive updated overview of the year’s events.

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1990 1992 1994 1996 1998 2000 2002 2004 2006 2008 2010 2012 2014 2016 2018 2020

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Severe Convective Storm Tropical CycloneSource: Aon Reinsurance Solutions

http://catastropheinsight.aon.com/


Contact Information Tracy Hatlestad Executive Managing Director Reinsurance Solutions +1 952 886 8069 [email protected] Greg Heerde Head of Analytics & Inpoint, Americas Reinsurance Solutions +1 312 381 5364 [email protected] Kelly Superczynski Executive Managing Director Capital Advisory, Americas +312 381 5351 [email protected]

Dan Dick Executive Managing Director Head of Catastrophe Risk Management +817 296 2283 [email protected]

Peter Cheesman Head of Analytics, APAC Reinsurance Solutions +61 2 9650 0462 [email protected] Mike Van Slooten Head of Business Intelligence, International Reinsurance Solutions +44 0(20) 7522 8106 [email protected] Marie Teissier Business Intelligence, International Reinsurance Solutions +44 0(20) 7522 3951 [email protected]

© Aon Securities Inc. 2020 | All Rights Reserved Aon Securities Inc. is providing this document and all of its contents (collectively, the “Document”) for general informational and discussion purposes only, and this Document does not create any obligations on the part of Aon Securities Inc., Aon Securities Limited or their affiliated companies (collectively, “Aon”). This Document is intended only for the designated recipient to whom it was originally delivered and any other recipient to whose delivery Aon consents (each, a “Recipient”). This Document is not intended and should not be construed as advice, opinions or statements with respect to any specific facts, situations or circumstances, and Recipients should not take any actions or refrain from taking any actions, make any decisions (including any business or investment decisions), or place any reliance on this Document (including without limitation on any forward-looking statements). This Document is provided for the purpose of providing general information and is not intended, nor shall it be construed as (1) an offer to sell or a solicitation of an offer to buy reinsurance, (2) an offer, solicitation, confirmation or any other basis to engage or effect in any transaction or contract (in respect of reinsurance, a security, financial product or otherwise), or (3) a statement of fact, advice or opinion by Aon or its directors, officers, employees, and representatives (collectively, the “Representatives”). Any projections or forward-looking statements contained or referred to in this Document are subject to various assumptions, conditions, risks and uncertainties (which may be known or unknown and which are inherently unpredictable) and any change to such items may have a material impact on the information set forth in this Document. Actual results may differ substantially from those indicated or assumed in this Document. No representation, warranty or guarantee is made that any transaction can be effected at the values provided or assumed in this Document (or any values similar thereto) or that any transaction would result in the structures or outcomes provided or assumed in this Document (or any structures or outcomes similar thereto). Aon makes no representation or warranty, whether express or implied, that the products or services described in this Document are suitable or appropriate for any cedent, sponsor, issuer, investor, counterparty or participant, or in any location or jurisdiction. The information in this document is based on or compiled from sources that are believed to be reliable, but Aon has made no attempts to verify or investigate any such information or sources. Aon undertakes no obligation to review, update or revise this Document based on changes, new developments or otherwise, nor any obligation to correct any errors or inaccuracies in this Document. This Document is made available on an “as is” basis, and Aon makes no representation or warranty of any kind (whether express or implied), including without limitation in respect of the accuracy, completeness, timeliness, or sufficiency of the Document.

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Executive Summary: Calm Amid the StormGlobal Reinsurer CapitalCapital recovers to pre-pandemic levelsTraditional capitalTraditional equity capital rose by USD3 billion to a new high of USD533 billion over the nine months to September 30, 2020, aided by a capital market rebound in the second and third quarters and around USD10 billion of new issuance. Reinsurer earnings...Capital raising in 2020Lloyd’s updateAlternative capitalCapacity outlook

Demand Upticks Slightly as Unique Market Dynamics Dictated Individual Lines and Segments OutcomesPropertyCasualty

2020: Near Average Year for Natural Catastrophe Losses Despite Record-Breaking Atlantic Hurricane SeasonExhibit 16: Insured Losses by Year by TypeExhibit 17: Insured Losses by RegionExhibit 18: Annual Global Severe Convective Storm & Tropical Cyclone Insured Losses

The biggest takeaway from 2020 for these perils is that the frequency of events is not always directly correlated to incurred losses. This is especially the case with the tropical cyclone peril, where the location and intensity of events is a much mor...To find the most up-to-date global catastrophe loss data for 2020, and other historical loss information, please visit Aon’s Catastrophe Insight website: http://catastropheinsight.aon.com.Impact Forecasting’s Weather, Climate and Catastrophe Insight: 2020 Annual Report will be released in late-January 2021 and include a comprehensive updated overview of the year’s events.Contact Information

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Contentsthoughtleadership.aon.com/Documents/20210105-rmo-january.pdf · 2021. 1. 14. · Only three...

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