January 7, 2014 by Canadian Underwriter
Last June’s flooding in southern Alberta was among the events cited in Munich Re’s review of global natural catastrophes during 2013 – a year that saw direct overall losses below average figures for the last decade, but also demonstrated how precautionary measures can benefit and how their absence can lead to higher costs.
Unusually heavy rainfall in Alberta of as much as 190 litres per square metre over one day coincided with late snowmelt, notes a statement issued Tuesday by Munich Re. “This led to record flooding on the rivers flowing through the province’s capital of Calgary – the Bow River and Elbow River. The economic loss amounted to US$ 5.7 billion, of which nearly US$ 1.6 billion was insured, making it the costliest natural catastrophe in Canada ever,” the statement adds.
Globally, the direct overall losses from natural catastrophes in 2013 were approximately US$125 billion and insured losses were about US$31 billion. The latter number was below the average figures of the past 10 years (US$184 billion and US$56 billion), Munich Re reports.
There were exceptionally high losses from weather-related catastrophes in Europe (floods and hailstorms caused double-digit, billion-dollar losses in central Europe) and Supertyphoon Haiyan (one of the strongest cyclones in history, Haiyan resulted in a human catastrophe with more than 6,000 fatalities).
“Several of the events of 2013 illustrated how well warnings and loss minimization measures can restrict the impact of natural catastrophes,” Torsten Jeworrek, Munich Re Board member responsible for global reinsurance business, notes in the statement. As an example, Jeworrek points out that losses remained comparatively low for the most recent winter storms in Europe. However, “events like those in the Philippines show the urgent need for more to be done in developing and emerging countries to protect people better,” he says.
Protective measures include more stable buildings and protection facilities, as well as insurance programs – also with state backing – “to provide those affected with financial assistance after a disaster,” Jeworrek adds.
The costliest natural catastrophes of 2013 – in terms of overall economic losses, insured losses and loss of life – were as follows:
· June’s flooding in southern and eastern Germany and the neighbouring states – in some cases, precipitation measured 400 litres per square metre in only a few days, and on many rivers, the subsequent flooding set new records – produced overall losses of US$15.2 billion and insured losses of US$3 billion;
· a squall line with hailstorms that hit some regions in northern and southwestern Germany in late July – representing the most expensive hail event in German history – caused damage to numerous cars, building façades, roofs and solar installations. Overall, the loss from heavy hailstorms in both July and August in Germany totalled approximately US$5.2 billion (US$ 4.8 billion of which related to the hailstorms in late July). Of the US$5.2 billion, US$4.1 billion was insured (US$3.7 billion of that related to the hailstorms in late July).
· Supertyphoon Haiyan, probably the strongest tropical storm ever to make landfall, in early November was the most severe catastrophe in human terms. More than 6,000 people were killed in the storm, millions were left homeless, the harvest in this significant agricultural region was largely destroyed. While the overall loss totalled some US$10 billion, the very low insurance penetration means insured loss will probably only be in the mid three-digit million range.
With regard to the flooding in Germany last year, the historical old city centre of Dresden escaped largely unscathed – unlike during the Elbe flood of 2002 – thanks to protective measures having been strengthened there, notes Munich Re. That said, although there was better protection in many places upstream, the situation was worse downstream.
“The 2013 floods showed that flood control can work. After all, the parameters such as duration and volume of rainfall would have led one to expect even more serious flooding than in 2002,” Peter Höppe, head of Geo Risks Research at Munich Re, says in the statement.
“Nevertheless, it also demonstrated that flood control has to cover the whole course of a river and cannot just consist of dykes. Rivers need space to spread out when there are floods, so that those living downstream are not hit even harder when protective measures are taken in the upper reaches. This requires efforts comprising the whole catchment area of a river, which, therefore, often have to be internationally co-ordinated,” Höppe explains.
Precautionary measures also proved their worth in several other weather-related natural catastrophes in Europe. “Losses from Windstorm Christian in autumn and Winter Storm Xaver were comparatively low, even though both swept over the U.K., the Benelux states, northern Germany and Denmark, with wind speeds sometimes exceeding 150 km/h,” notes the Munich Re statement.
For example, Xaver triggered a storm surge that led to the water in the River Elbe rising to more than 6.09 metres above normal in Hamburg, significantly higher than in the flood disaster of 1962, which caused 347 fatalities.
As Hamburg had invested more than 2 billion euros in protection measures since 1962, the statement notes the storm surge caused no major losses. A Munich Re analysis indicates that, altogether, the flood control measures have enabled Hamburg to avoid losses in the order of 20 billion euros since the 1962 flood.
With regard to Haiyan, the typhoon “shows the importance of government measures in construction planning,” Ludger Arnoldussen, whose responsibilities on Munich Res Board of Management include the Asian markets, says in the statement. “At the same time, insurance programs – possibly also with state backing – can help provide the people affected with quicker financial support. Studies sponsored by Munich Re have shown that insurance against natural catastrophes in emerging countries has the greatest relief effect in macroeconomic terms,” Arnoldussen adds.