Hurricanes Harvey, Irma and Maria (2017)

On August 25, 2017, Harvey makes landfall in Texas and drops more than five feet of rain on the Houston area, a flood more than a wind event. On September 10, Irma hits the Keys and Florida's west coast. On the 20th, Maria devastates Puerto Rico. Together they cost insurance tens of billions of dollars, and 2017 becomes the most expensive natural catastrophe year in reinsurance history to that date. A general price hardening was expected. It came only in part: programs that were hit saw their layers rise markedly at January 1, 2018, those that were not moved little, because capital from pension funds and ILS funds had been flowing in for years and reinsurers' free reserves had held. Collateralized reinsurance funds paid in cash, which had another effect: ILS's reputation as diversified capital took a hit, and capital trapped in slow-to-settle claims, Florida's in particular, locked up investors for months. For cedants, the season was a reminder that the wind and flood losses following a hurricane add up badly in a model that treats them separately, and that the risk of claims creeping up (loss creep) weighs as much as the initial loss. Pricing is then read layer by layer, with low layers that paid and high layers the market refused to reprice.