October 23, 2012 by Canadian Underwriter
North America is most affected by weather-related catastrophes, and the potential for even more disasters is increasing because of climate change, suggests a report from German reinsurer Munich Re.
Worldwide, the number of catastrophes has been on the rise since 1980, but that increase is most dramatic and impactful in the United States and Canada, according to a study from the company released this month.
Between 1980 and 2011, insured losses from catastrophes totaled $510 billion, Munich Re said. Weather-related losses in North America nearly quintupled since 1980, while they increased by a factor of 4 in Asia, 2.5 in Africa, two in Europe and 1.5 in South America, the company noted.
Storms, including hurricanes, tropical cyclones and thunderstorms, accounted for 89% of insured losses since 1980 (about $454 billion), the report said, while heat-waves, droughts and wildfires made up 15% of overall losses (about $160 billion).
The potential for even more weather-related disasters is still rising, mainly due to climate change, Munich Re notes. “In all likelihood, we have to regard this finding as an initial climate-change footprint in our U.S. loss data from the last four decades,” Peter Höppe, head of Munich Re’s Geo Risks Research unit, said in a written statement.
The insurance industry must keep detailed exposure and loss data, along with other up-to-date information to keep up with these weather trends and determine adequate premiums, Munich Re suggests. “Exposure growth will continue to be the major factor driving weather-related losses, while higher losses caused by changing climate conditions will not immediately be compensated,” the report noted.
Drought conditions, ageing infrastructure present risk to Canada
As all regions of Canada is prone to several kinds of severe weather, from wildfires to ice storms, and predictive efforts need to increase, the report noted. Flood events and wildfires remain the events that cause the most significant damage in Canada, and the area burned by wildfires has been increasing over the past few decades, likely due to hotter temperatures and drought conditions, the report said.
Increasingly heavy and frequent rainfall events, combined with the increasing number of Canadians living in urban centres such as Toronto and Vancouver, and ageing infrastructure have made urban flooding a more regular occurrence, the report suggests. Every year across Canada, property insurers pay more than $2 billion in water damage claims, the report noted.
More than 60% of homes and businesses in Canada are located in areas that have experienced water damage from tropical storms, the report also noted.
Coastal flooding is also a concern for the country, although it hasn’t seen major damage from those events. Climate change has increased that risk, the report suggests, leaving communities in British Columbia and the Atlantic provinces vulnerable. Rising sea levels and storm surges from hurricanes on the Atlantic coast are also concerns, the report noted.