2025 will mark the fifth consecutive year in which global catastrophe claims have exceeded $100 billion, but this has been less damaging for reinsurers due to a shift in who is responsible for paying claims, with reinsurers remaining in line with or below their catastrophe loss budgets in recent years, according to J.P. Morgan.
Analysts at J.P. Morgan said, “We believe that the best way to think about catastrophe claims is relative to total insurance industry premiums and on this basis the impact is less noticeable.
“Catastrophe claims between1980-2025E have been equivalent to ~3% of non-life industry premiums and using the 2021-25E this ratio is 2.9%. On a rolling 10 year average, catastrophe claims relative to industry premiums have stayed relatively stable at ~3% of premiums. In fact, there has probably actually been a slight reduction in the level of catastrophe claims relative to the size of industry premiums.”
The report stated that prior to 2023, the narrative was that catastrophe losses had increased and this had been a material headwind for reinsurers responsible for taking on parts of catastrophe risk from the insurance markets.
Analysts noted, “But we can see that 2021-25E have been average years for catastrophe losses relative to the size of the industry using a 1980-2025E average.
“What seems to have happened in our view is that there has been a shift in who has been responsible for paying claims.”
According to J.P. Morgan, in 2021 and 2022 reinsurers exceeded their catastrophe loss budgets, but since 2023 have remained in line with or below budgets on average.
“However if we look at 2023-2025 years at an industry level, they have not been material outliers in terms of being below average on claims. This suggests to us that the shift up that was seen in reinsurance retentions at the beginning of 2023 has made a meaningful difference to profitability for the industry,” J.P. Morgan concluded.
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