Munich Re, the world’s largest reinsurer, has just published an analysis of last year’s loss events, which includes a discussion of “underestimated loss potentials,” notably risks from a sudden strike by a meteor or comet, and the slower effects of global climate change.
“Owing to the fact that risk managers will generally have to rethink future loss potentials entirely in the light of 11th September 2001, this year’s publication turns the spotlight on the question of hitherto underestimated risks and unidentified loss potentials,” said the announcement. In other words, the unthinkable is no longer impossible.
The report estimates that there were around 700 natural hazard losses last year. which caused $36 billion in economic losses, roughly 20 percent higher than 2000. However, insured losses rose by more than 50% to $11.5 billion in 2001, compared to previous year’s $7.5 billion. Despite the increase the industry was relatively lucky last year. As the bulletin notes,”A gigantic loss event in the realm of natural catastrophes would have been a severe test on the capacity of the global insurance industry in addition to the burden it has to cope with from the devastating attack on the World Trade Center.
In this connection the report highlights a remote, but potentially devastating risk – objects from space.”Risk managers will have to think the unthinkable in the future – that is another thing the terrorist attack of 11th September 2001 in the United States has shown – and they will have to consider maximum loss potentials that are albeit improbable but nevertheless possible.”
A specially commissioned team of scientists conducted an in depth investigation of into the risk of meteorite crashes. They determined that over 100 such impacts occurred during the 20th century, the most spectacular in 1908 over the Tunguska region of Siberia. The pressure wave from an exploding meteorite estimated to have been no larger than 150 feet across (Although other scientists have concluded that it was a piece of a comet and could have been larger) flattened 1300 square miles of, luckily, mostly uninhabited forest.
Munich Re’s report concludes that “the effects of a ‘bombardment from space’ are to be carried by the insurance industry to a larger degree than has hitherto been assumed. This is because meteorite crashes will probably lead to explosions and numerous fires, which are covered in many insurance contracts nowadays.”
“Munich Re’s scientists continue to assume that climate and environmental changes have an increasing impact on the statistics,” the report stated. It urged adoption of risk assessment which takes into account all possibilities. This is often referred to as the “probabilistic model.” Dr. Wolf-Otto Bauer, member of the Board of Management of Munich Re, warned that underwriting strategy based on past experience is no longer sufficient, stating that “The effects of climate change make adequate prospective underwriting more essential than ever.”|”munich, re, reviews, 2001,, warns, on, meteorites,, climate, change
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