Q2 cat losses may be ~25% above average, with civil unrest a driver: CS analysts

Equity analysts at investment bank Credit Suisse said yesterday that they are anticipating the U.S. catastrophe loss burden for the insurance and reinsurance industry in the second-quarter of 2020 will be around 25% above the 10-year average.

Part of the driver for the elevated catastrophe loss load is the recent civil unrest in the United States, which the equity analysts say could cost the insurance and reinsurance market as much as $1 billion.

The second-quarter of 2020 has seen a number of periods of severe convective weather, tornadoes and thunderstorms, with large hail events again being a driver of relatively significant financial losses.

Both April and May saw multi-billion severe weather and convective storm losses, while according to insurance and reinsurance broker Aon’s Impact Forecasting division industry losses from the severe weather peril are now approaching $17 billion already in 2020.

So it’s no surprise that expectations for the eventual catastrophe loss burden of Q2 2020 are rising.

The analysts from Credit Suisse say that, having had discussions with industry participants and looked at recent disclosures, such as from Allstate’s above-average cat loss run-rate by the end of May, they are now expecting Q2’s cat loss tally to be approximately ~25% above the 10-year average run-rate.

It still may only be in the single-digit billions, but it seems likely to be at the higher-end of this range and remember this is the U.S. or Americas only.

We’re not sure whether this includes the recent severe hail storm in Canada from June as well.

The civil unrest and rioting in the U.S. is a driver as well, with the Credit Suisse equity analysts estimating that this is likely to cost the insurance and reinsurance market between $600 million to $1 billion alone, making it the most expensive example of a riot loss in the U.S.

As a result of the rising cat loss expectations, the analysts said that they have updated their models for reporting from major re/insurers, to factor in an expected higher than average loss burden for the second-quarter.