While it will take some days for more clarity to emerge over the scale of damage from Eunice, claims tallies are expected to begin to materialise this week with a significant number expected from London and the southeast.
And the low attachment points on reinsurance programs in the relatively concentrated UK property market heighten the potential for Eunice – and the storms which came immediately before and after – to trigger the lower layers of programs.
Eunice hit the UK on Friday following on from Storm Dudley on Wednesday, with a further storm – named by the Met Office as Franklin – impacting the country over Sunday night and this morning. The rapid succession of storms also raises questions around the potential application of hours clauses in XoL reinsurance treaties.
It is also possible that damage from fallen trees may be exacerbated by the quick succession of storms, with trees and structures already weakened by earlier winds brought down by a subsequent storm.
While provisional analysis suggests many areas experienced the strongest wind gusts recorded this century, the overall damage footprint of the storm is reported to be smaller than that of Windstorm Kyrill in 2007.
Kyrill was the last storm to bring inland winds of ~70mph to parts of the south of England exposed to Eunice. Damage from the current event is not expected to compare with previous major storms in 1987 and 1990.
If the overall damage is less than £1bn, then it is unlikely the event will result in any notable XoL reinsurance losses.
However, the impact from the event will likely be more severe when considered in the context of wider European damage. Eunice, which is known as Zeynep outside the UK, caused damage in France, the Netherlands and Germany after exiting the UK.
European windstorm losses have been moderate in recent years. According to Aon, calendar year economic losses from the peril have not topped $10bn since 2009.
Low retentions
Several major UK insurers, including Aviva, Direct Line and RSA, have retentions of £150mn or less on their catastrophe reinsurance programmes.
Aviva will likely reveal details of its 2022 catastrophe reinsurance program when it reports full-year results on 2 March.
For 2021, the group’s maximum potential retained loss for the European windstorm peril was ~£150mn on a per occurrence basis and £175mn on an annual aggregate basis.
The carrier’s group-wide catastrophe reinsurance program provides cover against losses up to a 1-in-250-year return period, according to its 2021 annual report.
Direct Line renewed its property catastrophe cover on 1 July 2021 with a £150mn retention and a limit of £1.15bn. The cover has one full reinstatement for the full program and one additional reinstatement with a limit of £530mn.
Prior to its acquisition by Intact Financial last year, RSA’s main catastrophe retention for the UK and Europe combined was £75mn.
The carrier had non-renewed its large loss aggregate cover for the UK, but did have a group volatility cover in place which attaches when the total of qualifying losses exceeds £160mn.
While new parent Intact has not revealed details of the terms of RSA’s reinsurance program for 2022, the Canadian carrier has said it optimised the program based on “our new exposures and diversification opportunities with a small reduction of the overall cost and slight increase in retention levels”.
Zurich is likely to retain a larger proportion of any exposure to the event, with the carrier’s Europe all perils tower having a $476mn retention on its 2022 reinsurance program. Zurich also increased the deductible on its global aggregate cat treaty to $900mn this year, compared with $800mn in 2021.
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