Natural, man-made disasters to cost insurance industry $65 billion this year: Swiss Re

Economic losses from natural catastrophes and man-made disasters will likely reach at least $140 billion (USD) this year, with total insured losses reaching $65 billion, according to preliminary estimates from a Swiss Re study.

Natural catastrophes alone will contribute to roughly $60 billion in insured claims, Swiss Re said.

Weather events, mainly in the United States, will dominate insured losses for 2012, the company noted, and the property and casualty industry will cover about $65 billion of all losses.

That’s mainly because of late October’s Hurricane Sandy and major drought in the U.S., following what was otherwise a quiet year. Loss estimates from Sandy are between $20 billion and $25 billion, while drought-related agricultural losses are likely to reach approximately $11 billion, including payouts from federal assistance programs, Swiss Re said.

Heavy losses in the U.S. are also in contrast to recent years, when earthquake and flood losses in Asia-Pacific and South America accounted for much of total global losses.

“Severe weather events continue to affect many parts of the world,” Swiss Re’s chief economist Kurt Karl noted in a statement. “Although insurance cannot bring back lost lives, many people and businesses can rely on financial relief from insurance cover, as is the case for the US. However, in large parts of the globe that are prone to severe weather events, people and businesses could increase risk-preparedness by eliminating underinsurance.”

Swiss Re’s estimate, though, isn’t as extreme as 2011, which saw insured losses of more than $120 billion during a year of several earthquakes and major flooding worldwide. The estimate for this year is, however, above the average for the last decade, Swiss Re noted.

Table courtesy of Swiss Re