Munich Re America Offers ‘Local’ Nat Cat Frequency Coverage

November 18, 2009

Munich Reinsurance America, Inc. announced that it now offers a reinsurance product for insurance companies impacted by rising insured losses from ‘local’ natural catastrophes.

“The Nat Cat Frequency Cover is designed to protect insurers against the accumulation of losses resulting from frequent, ‘local’ weather events, including thunderstorm hazards such as tornadoes or hail, winter storm hazards, and wildfire, or it can be customized for selected other perils,” said the reinsurer.

Munich Re explained that over the last 30 years, insured losses from these types of events have increased dramatically. “For example, research from Munich Re’s NatCatSERVICE indicates that losses from thunderstorms have more than tripled over the last 30 years, with 2008 and 2009 having the largest insured losses on record; winter storm losses have increased over 50 percent over the last 30 years; and losses from wildfires have significantly outpaced inflation and population growth over the last 40 years, with 2003 and 2007 being two of the most costly years on record.”

‘Local’ implies that whatever the catastrophe was, it wasn’t as serious as a national or international event. That, however, may no longer be true. Munich Re points out that according to A.M. Best, “losses of $1 billion and higher from single events are becoming more frequent, and approaching losses typically incurred from hurricanes. These increases are attributed, in part, to shifting socioeconomic conditions, including population increases in exposed regions and growth in the number and value of insured properties.”

Insurers also have “difficulty” when they’re confronted with “large accumulated losses from ‘local’ weather events,” as “traditional reinsurance catastrophe covers, which are designed to protect against severe events such as earthquakes and named storms, are not providing the necessary coverage to protect against event frequency.

“Munich Re America’s Nat Cat Frequency Cover is intended to complement, not replace, the excess of loss catastrophe covers that protect against event severity. By introducing this cover to a reinsurance portfolio, an insurer can better manage their earnings volatility and create financial stability in light of increased weather-related claims.”

Source: Munich Reinsurance America –

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