Allianz Nat Cat Analysis: Economic Growth a Major Factor for Increased Losses

March 24, 2011

Experts on natural catastrophe risk at Allianz have highlighted the growing trend in insured losses arising from natural catastrophes worldwide in a risk briefing – the “Allianz Risk Pulse: Focus Natural Catastrophes.”

Allianz points out that the “average annual cost of insured claims from natural catastrophes has increased eight-fold since 1970 (up from some $5 billion in the 1970s and 1980s to over $40 billion in 2010).”

The main reason for the steep increase hasn’t been the nature of the catastrophes. It’s been caused by economic growth. Specifically: “property values are rising, population density and insurance penetration are increasing, often in high risk areas – a trend that is compounded by the fast growth of some Asian economies in catastrophe-prone regions,” Allianz explained; adding that the “impact of climate change must also be closely watched.”

The Allianz analysts have also noted that preparedness and prevention extremely important. During the past decade, the earthquakes which caused the highest fatalities were not necessarily the strongest ones.

“For example, the 2010 quake in Haiti released 500 times less energy than the quake that hit Chile two months later – yet the Haitian quake wreaked much more havoc. The factors which determine the impact are complex and include building design and materials, severity of secondary earthquake effects like tsunamis or fires and lack of preparedness.”

There are certain key factors, which, if heeded, can reduce the impact from earthquakes, provided that those in charge focus on “prevention measures and earthquake preparedness.”

“Proper risk management prior to an event and preparation for a possible natural disaster are identified as key factors in reducing the impact.” Allianz indicated that a primary source for experienced risk management and claims investigations, is the insurance industry.

The bulletin explained that insurers such as Allianz “can advise their clients on how to analyze risks including natural catastrophes, how to prepare in advance and (for businesses) how to restore operations quickly after an event – a vital element in minimizing business interruption losses.”

“The insurance industry plays an important role when it comes to helping those affected by natural catastrophes, advising on preparedness and prevention and analyzing risk. Teams of claims regulators, risk managers, natural catastrophe experts and economic research specialists work hard to support clients and to understand natural catastrophes and their effects.”

Clement B. Booth, board member of Allianz SE in the Allianz Risk Pulse, stated: “Terrible events like major natural catastrophes illustrate the value and importance of insurance to society. The most important thing is to help those affected unbureaucratically and quickly – and to have a lot of empathy.”

Source: Allianz

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