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2014 catastrophe year in review: Up a little, down a lot

2014 U.S. Catastrophe Activity map
Source: Property Claim Services (PCS), a unit of Verisk Analytics

In some ways, North American catastrophe losses rose a little. In other ways, they fell a lot. Overall, 2014 was a quiet catastrophe year, with insured losses from North American catastrophe activity reaching only $16 billion. While that’s in line with 2013, the losses underlying the aggregate number are much different. Insured losses from PCS-designated catastrophe events in Canada fell 72 percent year over year. And although U.S. insured losses climbed nearly 20 percent from 2013, the $15.4 billion 2014 total is still well below the ten-year average. Frequency grew slightly for North America, rising to 37 events last year from 35 in 2013.

Full-year 2014 U.S. catastrophe review

Property Claim Services® (PCS®) designated 32 U.S. catastrophe events in 2014 — up slightly from 29 the year before. However, the resulting industrywide loss estimates By Joe Louwagie, Assistant Vice President, Property Claim Services®, Verisk Insurance Solutions – Claims and Crime Analytics are a bit different. U.S. catastrophe losses reached $15.4 billion last year, up 19 percent.

However, the 2014 result is off 33 percent compared with the ten-year average of $22.7 billion. Of course, 2005 took the average significantly higher: U.S. catastrophe events resulted in more than $50 billion in insured losses, about 80 percent of which came from Hurricane Katrina. The nine year average (2006 through 2014) is about $18.3 billion, 20 percent above 2014.

Frequency for 2014 was slightly above the ten-year average of 29.5 events. Over the past ten years, 2014 is one of only five years in which the number of catastrophe events designated by PCS reached at least 30. The most active year of the past decade was 2008, during which PCS designated 37 U.S. catastrophe events.

Top 10 state for insured losses catasrtophes
Source: Property Claim Services (PCS), a unit of Verisk Analytics

Catastrophe activity last year affected 38 states, with Texas remaining the most affected, at $2.2 billion. Colorado was next, at $1.7 billion, followed by Illinois and Pennsylvania, both at $1.2 billion. Catastrophe losses in Nebraska edged up above $1.1 billion. Once again, Oklahoma is not among the ten most affected states of the year, despite historically high frequency and severity.

Personal losses accounted for 60 percent of catastrophe losses in 2014, down slightly from 62 percent in 2013. Commercial losses rose slightly from 19 percent to 21 percent, with auto unchanged year over year.

insurance catastrophe losses by line of business 2013 2014 Pie chart
Source: Property Claim Services (PCS), a unit of Verisk Analytics

Fourth-quarter 2014 U.S. catastrophe review

PCS designated 6 catastrophe events in fourth-quarter 2014. Resulting in just under $700 million in insured losses, it was the quietest fourth quarter since 2009 ($200 million). The most severe fourth quarter was in 2012, when Superstorm Sandy caused $18.8 billion in insured losses.

Q4 2014 U.S. Catastrophe Activity

Frequency was up significantly in the fourth quarter of 2014. PCS designated 6 catastrophe events, well over the ten-year average of 3.3. The most active fourth quarter of the past ten years was 2006, during which 6 events occurred, resulting in $1.5 billion in insured losses. The quietest fourth quarters of the past decade came in 2008, 2009, and 2012 — each of which had only 1 PCS-designated catastrophe event. Of course, 2012 stands out for the severity of Superstorm Sandy.

Full-year 2014 Canadian catastrophe FY 2014 Canadian Catastrophe Losses review

PCS designated 5 catastrophe events in Canada in 2014, with 1 in the fourth quarter. Insured losses from those events reached about C$900 million, making 2014 the quietest catastrophe year since 2010 (C$800 million). Catastrophe losses fell 72 percent year over year. While that may appear to be a significant drop, 2013 was the most active year on record for PCS Canada®, with more than C$3 billion in insured losses from PCS-designated catastrophe events.

2014 Canadian Catastrophe Activity

Over the past five years, the average insured loss from a PCS-designated catastrophe event was C$1.5 billion, largely because of 2013’s C$3.2 billion in insured losses. Also, 2011 was quite active, with C$1.6 billion in catastrophe losses. Frequency was down slightly from Canada’s five-year average of 5.8 events, with 2011 the most active year at 7.

The lone fourth-quarter event in Canada resulted in insured losses of C$96 million and occurred in Ontario and Quebec. Since 2010, 17 catastrophe events have occurred in Ontario, with 9 each in Alberta and Quebec. During that period, Alberta sustained C$4.5 billion in catastrophe losses, followed by Ontario with C$2.6 billion.

Up a little, down a lot

The year had its ups and downs for North America — up slightly in the number of catastrophe events but down for insured losses from the ten-year average. In the United States, personal losses were down from 2013, but commercial losses were slightly up. And for the fourth quarter, the United States experienced the lowest insured losses since 2009.

PCS continues to serve the insurance industry by identifying catastrophes and providing reliable, objective, and timely catastrophe loss estimates.

Severe thunderstorms wreak havoc

One of the largest catastrophes in 2014 hit 15 states and Washington, D.C., from April 27 to May 1. PCS designated the event as CAT #40, a wave of thunderstorms and resulting tornadoes that caused deaths across multiple states, ripped roofs off houses, and uprooted trees, many of which landed on vehicles, homes, and businesses. Numerous cities across several states also experienced significant hail damage and strong winds. PCS completed its first survey and released a preliminary estimate of loss on May 22, 2014.

Ted Gregory, PCS operations manager, went to Alabama and Florida to assess the damage. He observed downed trees and power lines, damage to commercial structures, and flooding and wind-driven rain damage. Local emergency management and catastrophe adjusters were on-site in affected communities to help families and businesses. PCS monitored the effects of this event through catastrophe resurveys — a process it uses for events that exceed $250 million to resurvey affected insurers to assure accuracy and identify loss components and claim issues. PCS continued the process until it was confident of a fully developed loss estimate. The final estimate, published on July 24, 2014, was $1.1 billion.

Joe Louwagie

Joe Louwagie, assistant vice president, Property Claim Services for Verisk insurance solutions – Claims and Crime Analytics, is responsible for catastrophe identification, loss estimating, and activities for catastrophe response and mitigation. He’s an authority on catastrophe issues affecting the private and public sectors, with more than 20 years’ experience in the insurance industry.

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