There is a 7% probability that the global insurance industry will see a level of loss similar to 2011, when insured losses from global natural catastrophes exceeded $110 billion, suggests a new report.
In its report, Taking a Comprehensive View of Catastrophe Risk Worldwide, catastrophe modelling firm AIR Worldwide looks at scenarios that could result in much larger losses than the industry saw in 2011. The 7% probability translates to a 15-year return period, the company says.
2011 saw 175 natural catastrophes, including a major earthquake in Japan, flooding in Thailand, earthquakes in New Zealand, and a record-breaking severe thunderstorm season in the United States.
AIR estimates the average annual loss from natural catastrophes is $59 billion, in line with global catastrophes losses from last year, which are estimated to be around $58 billion, the company says.
“Many in the industry were surprised at the aggregation of losses in 2011, especially since we didn’t have a major U.S. hurricane,” Bill Churney, senior vice president, AIR Worldwide noted in a statement.
“However, AIR’s models incorporate years with losses much greater than what we experienced in 2011. This is the real value of having a credible catastrophe model — to fully anticipate possible outcomes, including future catastrophes and future years that will produce losses exceeding any historical amounts,” he added.
“Despite the significance of the toll in 2011, insured losses fell well within the range for which global insurers and reinsurers should be prepared,” Churney also noted. “It’s our hope that the report will help companies increasingly concerned about escalating levels of loss to better understand and own their risk.”