2010 Nat Cats, Disasters Cost $218 Bn – $43 Bn Insured; Says Swiss Re

March 29, 2011

According to Swiss Re’s latest sigma study, worldwide economic losses from natural catastrophes and man-made disasters were $218 billion in 2010, more than triple the 2009 figure of $68 billion.

The losses cost the global insurance industry more than $43 billion, an increase of more than 60 percent over 2009. The events caused the deaths of approximately 304,000, the highest number of casualties since 1976.

Swiss Re’s study pointed out that the severe catastrophes in 2010 “claimed significantly more lives than the previous year” when 15,000 people died due to catastrophic events. The Haiti earthquake was the deadliest, claiming more than 222,000 lives. Nearly 56,000 people died during the summer heat wave in Russia, while the summer floods in China and Pakistan resulted in over 6,200 deaths.

Swiss Re’s study calculated that natural catastrophes “cost the global insurance industry roughly $40 billion in 2010, while man-made disasters triggered additional claims of more than $3 billion.” This compares with overall insured losses of $27 billion in 2009.

Lucia Bevere, one of the study’s authors, added: “Insured losses were highest in North America in 2010, where they exceeded $15 billion. Despite very low hurricane losses due to the absence of hurricanes making direct landfall in the US, a series of lesser storms throughout the year resulted in this high figure.”

Recent events have shown how destructive earthquakes can be. In 2010 they were the cause of “almost one third of all catastrophe losses.” The February 2010 earthquake in Chile and the September earthquake in New Zealand were the two costliest events in 2010, and led to insured losses estimated at $8 billion and $4.4 billion respectively.

The study also concluded that overall natural catastrophe claims in 2010 were “in line with the 10-year average due to unusually modest US hurricane losses and in spite of notably high earthquake losses.”

2011 also promises to be an “above average” year as far as earthquake related losses are concerned. Swiss Re pointed out that the “total insured claims for the February 22 earthquake in Christchurch, New Zealand, are estimated to be between $6 billion and $12 billion. The massive Tohoku earthquake that struck Sendai, Japan on March 11 is also expected to trigger significant insured losses.” [IJ Ed. Note – these have been estimated to be as high as $30 billion].

Balz Grollimund, one of the study’s authors, explained: “Although no long term trend of increasing global earthquake activity has emerged, the number of fatalities and insured losses from earthquakes are on the rise. The main reasons are population growth, the higher number of people living in urban areas as well as rising wealth and rapidly increasing exposures. Many of these rapidly growing urban areas are located in seismically active areas.”

Ten events each triggered insured losses of at least $1 billion in 2010. In addition to the earthquakes winter storm Xynthia in Western Europe caused insured losses of $2.8 billion. Three storms in the US and two storms in Australia also generated losses of over $1 billion.

Property claims from the BP Deepwater Horizon explosion in the Gulf of Mexico are estimated at $1 billion. However Swiss Re pointed out that “given the complexity of the claims, the latter figure is still subject to substantial uncertainty. The overall insurance loss is higher, as liability losses are not included in the sigma numbers.”

While the $43 billion paid by the insurance industry is a substantial figure, it’s less than 20 percent of the total worldwide economic losses from natural and man-made catastrophes in 2010. “Asia was the hardest-hit region with total damages of approximately $75 billion,” said the study. “Pakistan and several large regions in China experienced extraordinary rainfall during the summer, resulting in devastating floods.”

Thomas Hess, Chief Economist of Swiss Re, commented “2010 was not only characterized by severe earthquakes that ranked among the deadliest, costliest and most powerful in history, but also by a series of extreme weather events, such as major floods. Some of these flood events sadly affected countries with poor emergency preparedness and underdeveloped insurance markets.

“These events show the urgent need to strongly improve prevention and post disaster management in order to reduce human suffering,” he continued. “The rapidly increasing wealth in emerging markets should also be used to address these problems. This wealth will also allow insurance to grow and close part of the large insurance protection gap in many emerging markets, the main reason why the financial protection against catastrophes is low in most emerging markets.

Source: Swiss Re

Was this article valuable?

Here are more articles you may enjoy.