By : Katie Baker _____Financial services company Jefferies has released a catastrophe loss model update, which estimates that severe weather cost insurers $5 billion in the month of August 2020.

This is is the same amount as Hurricane Laura, suggesting that weather has been an issue long before the hurricane.
Year-to-date, Jefferies expects that catastrophe losses now stand 4% higher than the 10-year average, implying that catastrophe loss ratio estimates should ideally be in line with or marginally above company budgets.
Its catastrophe claims model, supported by industry reports and Jefferies weather data, shows an unusually high frequency of wind and rain losses in August 2020. In aggregate, it has estimated that these cost c.$5bn, the same amount as the Jefferies assessment of Hurricane Laura.
Given that these events are large enough to generate claims but often small enough to go unreported in the international press, it seems likely that any consensus has yet to note their magnitude.
Compared to the longer-term average in our model (since 2008, the first year of our monthly data), catastrophe losses year-to-date are 13% above average and 4% higher than the 10-year average.
This is primarily driven by severe weather and cyclones, which are 61% and 109% above the 10-year average respectively, reminding us how benign the 2013-2016 period was.
Jefferies has concluded that updated corporate forecasts should include catastrophe loss ratio estimates that are marginally above budgets. Ultimately this means it appears to be negative relative to consensus.
Hurricane Laura made landfall as a Category 4 storm near Cameron, Louisiana on 27th August. With 150 mph winds it was one of the strongest hurricanes to make landfall in Louisiana since 1856.
However, though the storm was undoubtedly the most material natural catastrophe of the month, we note that its point of landfall, on the border of Louisiana and Texas, has a far lower population density than average, being precisely between Houston and New Orleans.
Jefferies notes that insured losses of this scale are consistent with Munich Re’s estimate for “claims in a low three-digit-million euro range”.
Catastrophe insured losses are 13% higher than the long-term average (2008-2019) and 4% higher than the 10 year average. This is mainly driven by severe weather and tropical cyclones, which were 61% and 109% above the 10 year average respectively.
The severe weather and tropical cyclone losses were attributable to Cyclone Amphan, Hurricane Laura, and severe weather in the US. Historically, severe weather has been a frequent event in the US so we expect to see high insured losses particularly as more extreme weather trends develop in the region in the coming years.