The report finds that a significant proportion of the unprecedented flood losses generated by Hurricane Harvey in Texas and Louisiana will be uninsured, again highlighting the existence of a global protection gap. As a result, those affected will require substantial financial support from the United States government.
The United States is one of the most insured countries in the world and yet, in 2016, almost 50 percent of the economic losses sustained from natural disasters remained unprotected, according to data compiled for Aon Benfield's most recent Annual Global Climate and Catastrophe Report. Much of the rest of the world remains chronically under-insured, at a time when the frequency of severe weather events is increasing.
Meanwhile, the first half of 2017 saw a renewed surge of capital into the reinsurance sector, raising the total capital available to a record level of USD605bn at June 30, 2017, according to Aon Benfield figures.
Eric Andersen, Chief Executive Officer of Aon Benfield, said: "Hurricane Harvey has had devastating consequences and unfortunately many of the losses are uninsured, leaving the United States government, and therefore taxpayers, to pick up most of the bill. At the same time, we have an 'over-capitalized' reinsurance industry and new investors actively seeking access to diversified insurance risk. The frequency of severe weather-related losses is increasing and there needs to be a significant step-up in the efforts made to address the protection gap evident globally."
The Reinsurance Market Outlook report reveals that major reinsurers continued to produce solid results in the first half of 2017, driven by a relatively benign loss environment and stabilized investment returns. It also highlights the competitive impact of a surge in alternative capital at the mid-year renewals.
Based on preliminary figures, and prior to the impact of Hurricane Harvey, insured losses for the first eight months of 2017 totaled USD24.5bn, representing 56 percent of the 10-year average for the period. The reinsured component of these losses was low, given that a high proportion related to localized severe weather events in the United States.
The Reinsurance Market Outlook – September 2017 report
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