Canadian Underwriter

Insured losses from disasters below average in 2014 despite record number of natural catastrophe events: Swiss Re sigma study

March 25, 2015   by Canadian Underwriter

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Global insured losses from natural catastrophes and man-made disasters were $US35 billion in 2014, down from $US44 billion in 2013 and well below the $US64 billion-average of the previous 10 years, according to a Swiss Re sigma study released on Wednesday.

Global insured losses from natural catastrophes and man-made disasters were $US35 billion in 2014There were 189 natural catastrophe events in 2014, the highest ever on sigma records, causing global economic losses of $US110 billion. Approximately 12,700 people lost their lives in all disaster events, down from as many as 27,000 in 2013, making it one of the lowest numbers ever recorded in a single year, Swiss Re said in a press release.

In Canada, the biggest loss-inducing natural disaster was a series of thunderstorms in Calgary in mid-August, leading to insured losses of $US0.46 billion. “After record losses in 2013, it was a quiet year in terms of natural catastrophes in Canada,” the report said.

Total economic losses from all disaster events in 2014 were $US110 billion, down from $US138 billion in 2013, and well below the previous 10-year annual average of $US200 billion. Of these total economic losses, $US101 billion were due to natural catastrophes, with cyclones in Asia Pacific causing the most damage, the press release said. Of the $US35 billion in global insured losses last year, $US28 billion were attributed to natural catastrophe events. [click image below to enlarge]

Total economic and insured losses in 2014 and 2013

“The frequency of catastrophic events appear to be increasing, with a record number of natural catastrophes last year,” Kurt Karl, Swiss Re’s chief economist, said in the press release. For example, a series of severe thunderstorms triggered sizable losses in both the United States and Europe last year. In May, a spate of severe storms with hail in the U.S. resulted in the largest insured loss event of the year, with insurance claims of $US2.9 billion.

In Europe in the following month, the low pressure system Ela brought large and damaging hail to parts of France and Belgium, and strong winds in Germany. The combined insured losses were $US2.2 billion, making Ela the second most expensive hail event in Europe on sigma records.

Related: Disaster losses of $21 billion in first half of 2014 below previous 10-year average: Swiss Re

Harsh winters in the U.S. and in Japan were another major cause of insurance claims in 2014, the study said. The U.S. experienced multiple storms with heavy snow and long stretches of freezing temperatures. Insured losses from all winter storms in the U.S. were $US2.4 billion, more than double the average of the previous 10 years. The largest loss event was a storm in January that impacted 17 states, with snow falling as far south as Florida, leading to overall insured losses of $US1.7 billion. Meanwhile in Japan, a severe cold snap in mid-February brought the heaviest snow in decades, killing 26 people and injuring many more, primarily in road accidents. The insured loss total was estimated at $US2.5 billion. [click image below to enlarge]

Number of events, victims, economic and insured losses by region, 2014

It was another quiet hurricane season in the North Atlantic in 2014, with no major hurricane making U.S. landfall for the ninth year in succession. This was the main reason for the overall below-average insured losses last year, the study said. In contrast, there were 20 named storms in the eastern Pacific, the most since 1992. Of those, in September Hurricane Odile in the Baja of California, Mexico, caused the biggest event loss. The region is a tourist destination with many hotels and commercial properties and consequently, insurance penetration is relatively high. The insured losses were $US1.7 billion, making Odile the second largest insured loss event ever in Mexico, after Hurricane Wilma in 2005 which caused insured losses of $US2.1 billion.

Related: Global insured catastrophe losses in 2014 hit lowest level in five years: Guy Carpenter

Lack of insurance cover, however, remains an issue in many countries, the study said. For example, in May, low pressure system Yvette brought very heavy rain to Serbia, Bosnia and Croatia, in some areas the heaviest downpour in 120 years. Several dams failed and the ensuing floods and debris flows destroyed houses, infrastructure and crops. There were 82 deaths, the largest loss of life from a natural catastrophe event in Europe in 2014, and total losses were estimated to be $US3 billion, mostly uninsured. Italy also endured a very wet year, with a series of flash floods events causing overall economic losses of more than $US1 billion, also largely uninsured. [click image below to enlarge]

Number of man-made and natural catastrophe disaster events, 1970-2014

There are areas which are underinsured in the U.S. also, the study pointed out. In August last year, the South Napa earthquake caused structural and inventory damage totaling $US 0.7 billion, particularly in the numerous barrel storage facilities of the local wine industry. However, the insured loss was just $US0.16 billion. “In spite of high exposure to seismic risk, insurance take-up in San Francisco County and California state generally is still very low, even for commercial properties. That’s why insured losses, in certain areas, can be surprisingly low when disaster events happen,” said Lucia Bevere, co-author of the study.

The sigma study also includes a special chapter on severe thunderstorms, sometimes called severe convective storms. The total costs and insured losses of severe convective storms have been on an upward trend over the last 25 years, the press release said, mainly due to rising losses in the U.S. where the frequency of storms (particularly tornadoes) and insurance penetration are highest, and in Europe where hail storms and flash flooding happen often.

The global insured los
ses from severe convective storms rose by an average annual rate of 9% in the period 1990 and 2014. Insured losses from all-weather events in the same period rose by 6.6% on the same basis. In the U.S. alone, insured losses from severe convective storms averaged $US8 billion annually between 1990 and 2014. And from 2008, those losses have exceeded $US10 billion every year, including in 2014 when insured losses were $US13 billion, the fourth highest on sigma records.