Despite the overwhelming human and economic losses associated with the tsunami which devastated multiple South Asian countries on December 26, the world’s largest reinsurers say the insurance impact will not be severe.
As of Sunday, the death toll is expected to be over 150,000 from the tsunamis, which struck countries in Asia, India and Africa including Thailand, Sri Lanka, Indonesia and as far west as Somalia. The tsunamis were the result of a seaquake registering 9.0 on the Richter scale, which originated in the Indian Ocean near Indonesia. As of late Sunday, five Canadians had been confirmed dead, while about 150 were still unaccounted for. The lack of communication, as well as the large numbers of dead and injured, has hampered efforts to confirm the status of Canadians in the region.
Swiss Re and Munich Re have both come out with loss estimates which fall around the US$100 million mark Swiss Re estimates losses bellow CHF100 million, which Munich Re says losses will be less than EUR100 million, adding that the losses would not impact yearend earnings forecasts. Overall, insured losses are expected to be a fraction of that seen as a result of the four major hurricanes which hit the southeast U.S. this fall, where losses will top US$20.5 billion.
The low level of insured losses from the tsunami disaster can be attributed to several factors, Munich Re notes, including that earthquake risk which would include tsunamis resulting from seaquakes – in affected countries is largely excluded from property policies, and additional covers such as life & health insurance are not in widespread use.
In its analysis, Swiss Re notes that tsunamis, unlike hurricanes and earthquakes, are difficult to model for risk purposes. This is because they result from a variety of causes earthquake, volcanic eruption, landslide or meteor impact, for example and because they are so rare. The December 26 event represents the first time in 40 years that a major tsunami has hit a densely populated area.
Strangely, the event fell on the anniversary of two other tragedies, Swiss Re notes the Bam, Iran earthquake in 2003 and winterstorm Lothar which hit several European countries in 1999.
The tsunamis capped off a record year for catastrophe losses, with Munich Re putting yearend insured losses due to natural catastrophes at more than US$40 billion, with more than US$35 billion attributed to hurricanes and typhoons. Economic losses due to natural catastrophes in 2004 were double the figure posted in 2003 at US$130 billion. US$30 billion of this comes from the October 27 earthquake in Japan, where most of the losses were on uninsured infrastructure buildings.
Also, notwithstanding the seaquake, natural catastrophes were responsible for 15,000 deaths, with Haiti and the Dominican Republic losing more than 4,000 people due to flooding in May and as a result of Hurricane Jeanne in September.