Q4 2023 catastrophe losses seen below-average: J.P. Morgan analysts

Insured catastrophe losses in the fourth-quarter of 2023 are expected to come in below average for the period, according to the equity analyst team from J.P. Morgan.

“Looking at Q4 in isolation, we believe that the quarter is likely to be lighter than average with around $8-10bn, which could position some of the reinsurers to have stronger margins or to be able to set aside further conservatism within their 2023 result,” the analysts explained.

As a result, the analysts from J.P. Morgan believe that full-year 2023 global insured catastrophe losses will come in below $100 billion.

Which will make 2023 a “lighter” year for the major global reinsurance firms, the analysts say, something that reads across positively for the insurance-linked securities (ILS) community and also those invested in the quota share and retrocession arrangements of major reinsurers.

Hurricane Otis and its impacts on Mexico was one of the largest events of the final quarter of 2023, with estimates that it cost the insurance and reinsurance industry between $3 billion and $6 billion.

More than half of the full-year insured catastrophe loss burden is expected to come from United States severe weather, across numerous outbreaks.

As a result, the primary insurance carriers are expected to have taken the bulk of these losses, with the reinsurance industry less affected thanks to higher attachment points ad tighter terms.

Because the fourth-quarter burden has been lighted than normal and the full-year catastrophe loss load is not as significant as some recent years, the J.P. Morgan analysts say they remain positive on the reinsurance sector, given its “robust backdrop and rate adequacy compared to 2022 and before.”

Last week, Munich Re said that global natural disasters and severe weather are estimated to have caused the insurance and reinsurance industry losses of US $95 billion.