Gallagher Re’s Q1’24 Natural Catastrophe and Climate Report highlights the urgent need for the insurance industry to carefully assess unexpected factors that can extend event loss behavior. Additionally, it emphasizes the growing challenge of social inflation.
The report singles out event loss underestimation as the most critical issue, with complexities in loss development varying significantly by peril and region. Gallagher Re provides an example of significant loss development following Italy’s series of catastrophic hailstorms in July 2023.
Gallagher Re Provides an Example
Initial estimates from Q3 2023 to early 2024 indicated insured losses of around $3 billion. However, these estimates surged to approximately $5.5 billion, marking an 81% increase in insured loss progression. This substantial growth caused disruptions within the local industry.
These cases underscore the importance of managing uncertainty in loss development within the insurance industry. Gallagher Re suggests several crucial options for companies to protect themselves, including investment strategies involving retrocession contracts, aggregate reinsurance covers, and various insurance-linked securities (ILS) funds.
Addressing Loss Underestimation
Gallagher Re’s Q1’24 Natural Catastrophe and Climate Report underscores the urgent need for the insurance industry to address loss underestimation while grappling with the challenges of social inflation.
Event loss underestimation is identified as the most pressing issue in the report, with complexities in loss development varying significantly by peril and region. Gallagher Re highlights the significant loss development following Italy’s series of catastrophic hailstorms in July 2023 as an example.
Strategies from Gallagher Re
Initial estimates from Q3 2023 to early 2024 suggested insured losses of around $3 billion. However, these estimates surged to approximately $5.5 billion, marking an 81% increase in insured loss progression. This substantial growth caused disruptions within the local industry.
These cases underscore the importance of managing uncertainty in loss development within the insurance industry. Gallagher Re suggests several crucial options for companies to safeguard themselves, including investment strategies involving retrocession contracts, aggregate reinsurance covers, and various insurance-linked securities (ILS) funds. These strategies aim to provide financial protection and mitigate the impact of underestimated losses on insurers and reinsurers alike.
