Jebi loss hits $7bn as fears of multi-billion Trami loss rise

Insured losses from Typhoon Jebi look set to stretch to or beyond $7bn as the claims picture on the September storm substantially deteriorates, and the impact of Typhoon Trami could mean $10bn of cat claims emanating from Japan inside a month.

Underwriting sources had initially forecast a loss in the region of $5bn, with the modelling firms well below this level. RMS estimated a loss of between $3bn and $5.5bn, while AIR Worldwide modelled $2.3bn to $4.5bn.

However, property cat underwriting sources said that as the loss becomes clearer, it is now likely to come in significantly higher. They suggested that its impact is likely to be closer to that of Typhoon Mireille in 1991, which created $10bn in damage, of which $6bn was insured.

Jebi was the strongest typhoon to make landfall in Japan in 25 years, hitting the island of Shikoku at midday on 4 September at the equivalent of a Category 3 hurricane.

Early this month, underwriting sources warned that as a circa-$5bn event, Jebi would have eaten through the first layers of occurrence covers and could hit second layers for the most heavily impacted cedants.

Now that Jebi is thought to be a $7bn+ event, sources said the typhoon is likely to hit cedants’ third layers of occurrence cover in some cases.

They also said a number of major insurers purchase aggregate reinsurance, with an industry limit of around $1bn. This limit is believed to have been wiped out by a succession of events, which include devastating floods in the summer and a series of smaller typhoons.

Swiss Re has substantial gross exposure to the aggregate covers; some sources suggest it could have as much as half of the $1bn limit in the market.

Sources said Mitsui Sumitomo Insurance (MSI) bought around $300mn of aggregate cover.

Typhoon Trami, which struck Japan in late September, added further woe for reinsurers covering Japanese cedants.

Trami losses are expected to be around half those caused by Jebi, with underwriters’ estimates ranging from $3bn to $4bn. At this level, it could catch the first layers of occurrence covers, sources said.

With aggregate covers exhausted by Jebi, some cedants bought “back-up” aggregate covers.

These protections covered all natural perils and attached at fairly low limits, however, and were bought as sub-layers with no maximum event caps, meaning they could be triggered by a first event.

As Trami losses are thought to be at least $3bn, sources said these back-up covers are likely to be exhausted already.

Underwriting sources said carriers will push for rate increases at key Japanese renewals in April 2019 to compensate for a year of typhoons, earthquakes and flooding in the region.

Swiss Re did not respond to requests for comment.

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