As the insurance market transitions, insights drawn from data and analytics presents opportunities and impacts the way we view risk: Aon report

TORONTO, August 28, 2019 – Major wildfires, tropical cyclones and severe thunderstorms caused US$225 billion in economic losses globally and US$90 billion in insured losses in 2018 – nearly 50% higher than the annual average between 2000 and 2017. According to the 2019 Insurance Market Report from Aon, a leading global professional services firm providing a broad range of risk, retirement and health solutions, the catastrophe losses made 2017 and 2018 the most expensive two-year period for insurers ever recorded. The overall market remains resilient, but industry players need to adjust to a rapidly hardening market.

“Insurers’ capital positions remain strong for primary and reinsurance markets. The Canadian insurance market in particular continues to attract capital because of its relative profitability and stable political environment,” said Russell Quilley, Chief Broking Officer, Aon in Canada.

“It’s clear, however, that we are in the midst of a transitioning market, and brokers, carriers and clients will need to think differently from the way they have in over a decade,” added Quilley. “In a volatile business environment, it’s imperative for industry players to not only understand the impact of weather-related events and other changes, but also leverage the tools and expertise available to them. Putting innovation to work, and finding efficiencies in risk management and transfer solutions, will be more critical than ever.”

Key findings

• At US$225 billion, inflation-adjusted economic losses in 2018 were the second highest on record and followed losses of US$358 billion in 2017. Cyclones and hurricanes were the most significant cause (20% of total economic losses), along with wildfires in California, flooding in Japan and drought in the United States. Insured losses reached US$90 billion, down from US$134 billion in 2017.
• Against those losses, global insurers’ had a larger capital base, which grew 3.3%, to US$4.4 trillion, by the end of 2017.
• Canada continues to be an attractive location for capital deployment; the Canadian industry’s cumulative net combined ratio of 98.3% compares favorably with the U.S. (98.6%) and UK (99.7%) markets.
• The reinsurance market is well capitalized, despite a 3% decline in total reinsurance capital from 2017 to 2018. Global reinsurer capital stood at an estimated US$585 billion in 2018, still 30% higher than in 2011.
• The loss events of 2017/18 had the biggest impact on the alternative capital market, which includes catastrophe bonds and industry loss warranties. Growth has slowed as the entry of new funds is being offset by redemption and losses from catastrophic events.
• The top risks for insurers identified in the 2019 Aon Insurance Market Report include cyber attacks and data breaches, damage to reputation/brand, business interruption, regulatory changes, weather/natural disasters and an economic slowdown.

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