2007 Cat Losses Top $70 Billion Swiss Re sigma Study Finds

March 12, 2008

Swiss Re’s latest sigma study – “Natural Catastrophes and man-made disasters in 2007” – examines catastrophe-related economic losses from natural and man-made disasters last year, which exceeded $70 billion. Swiss Re also noted that the disasters caused the deaths of more than 20,000 people and saw property claims rise to $28 billion.

“Although 2007 was not an exceptional year in terms of either fatalities or losses, statistics confirm a trend towards an increase in the number – and cost – of natural catastrophes and man-made disasters,” Swiss Re noted.

According to the study 142 natural catastrophes and 193 man-made disasters occurred in 2007. One of its authors, Rudolf Enz, stated: “Catastrophes claimed the most lives in Bangladesh, India, China and Pakistan in 2007. In terms of insured property losses, Europe was the worst hit last year. However, losses in the US, which are usually at the top of the loss tables, were minor in comparison to previous years.”

Payments for property insured losses were more than $23 billion for natural catastrophes. Swiss Re noted the following: “In 2007, Europe was unusually hard-hit by natural catastrophes. In January, winter storm Kyrill caused insured losses of $6.1 billion across Germany, the UK, Belgium and the Netherlands. During the summer, the UK was also hit twice by heavy rains and flooding, causing $4.8 billion in insured losses. In April, the most expensive event in the US occurred, a storm with high winds, hail and floods, which resulted in insured losses of $1.6 billion. In October, forest fires in California led to insured losses of just over $1 billion.”

Man made disasters accounted for another $4 billion in insured losses. These included: “major industrial fires, explosions and aviation and spacecraft losses at the top of the list. Man-made catastrophes resulted in 6 900 deaths in 2007; shipping and boating accidents as well as bombings and social unrest caused the most casualties.”

Enz also noted: “Long-term figures indicate a steep upward trend, particularly in flood losses. Since 1970, losses have risen annually by an average of 12 percent (7 percent when adjusted for inflation). This translates into a doubling of the nominal burden in just over six years.”

The insurance industry is very much aware of the need to address the situation. Swiss Re notes that “over the past few years, insurers have been working to adapt their models to the new data and findings, especially since their flood loss models are flawed. Most flood models rely heavily on data from the 1960s to the1980s, when the incidence of flooding in Europe was below the norm. As a result, the current event frequency is under-weighted in most flood models.

“The insurers’ other focus is on the transfer of catastrophe risks to the capital markets. An important aspect of this is the development of transparent indices outside the US. Under the guidance of the CRO Forum (Chief Risk Officer Forum of the Geneva Organization), the insurance industry in Europe has launched an initiative aimed at developing loss-based indices for Europe.”

The report may be obtained on the reinsurer’s web site at: www.swissre.com. A copy of the media release containing graphs, charts and other information may be obtained at: sigma@swissre.com.

Source: Swiss Re

Topics Trends Catastrophe USA Profit Loss Europe Flood Swiss Re

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