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AnalysisInsuranceThe WrapThe Float

Marsh Re: reinsurance anchored to 1-in-100 as storm losses top $30B

Cedents and cat bond investors may be underweighting severe convective storm frequency by pricing to a one-in-100-year tail.

At a glance

  1. A one-in-100-year event framework prices the rare severe event; it does not, by itself, reset attachment each year for storms that repeatedly clear lower thresholds.
  2. For allocators to catastrophe risk, a cedent or cat bond investor valuing a program at that return period may be underweighting the frequency component of severe convective storm loss.
  3. The tail may remain well covered, but the more useful test is how attachment points are set against a $30 billion-a-year baseline, not aggregate capacity.

U.S. severe convective storm losses have topped $30 billion a year since 2020, yet reinsurance programs are still built around the one-in-100-year event, according to Marsh Re.

A one-in-100-year event framework prices the rare severe event; it does not, by itself, reset attachment each year for storms that repeatedly clear lower thresholds.

For allocators to catastrophe risk, a cedent or cat bond investor valuing a program at that return period may be underweighting the frequency component of severe convective storm loss. The tail may remain well covered, but the more useful test is how attachment points are set against a $30 billion-a-year baseline, not aggregate capacity.

Reported by The Wrap desk from Marsh Re. Published . Corrections

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