Canadian Underwriter

Winter storms in northeast Canada and U.S. costliest global nat cat in 2015: Munich Re

January 4, 2016   by Canadian Underwriter

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The costliest global natural catastrophe for the insurance industry was a series of winter storms that struck the northeast United States and Canada, Munich Re said in its 2015 nat cat review, released on Monday.

According to a press release from Munich Re, insured losses for the storms came to US$2.1 billion, with overall losses of US$2.8 billion. In the U.S., the winter of 2015 was unusually cold and snowy in the northeast part of the country. In Boston, a record 90 inches of snow fell over a three-week period, resulting in “extraordinary snow loads that damaged thousands of buildings,” Munich Re reported. [click image below to enlarge]

Insured losses for winter storms in northeast Canada and U.S. came to US$2.1 billion, with overall losses of US$2.8 billion

“North America is hit by dozens of winter storms annually, which cause a variety of hazards such as snow and sleet,” said Mark Bove, senior research meteorologist, Munich Reinsurance America, Inc., in the release. “But despite the frequency and size of winter storms, they do not usually have the same loss potential as tropical cyclones or earthquakes. Nevertheless, a large number of winter storms in rapid succession can lead to significant aggregate losses.”

There were direct overall losses of US$4.6 billion in the U.S. from the harsh winter of 2014/15, of which US$3.4 billion was insured. Losses were even higher than in the frigid winter of 2013/14 (US$4.4 billion; insured losses US$2.5 billion).

Despite the 2015 winter storms, however, industry-wide losses from nat cats last year were lower than the previous year, due in part to El Niño climate conditions in the Pacific Ocean, which reduced hurricane activity in the North Atlantic, the release noted. In the U.S., 2015 estimated nat cat losses totalled US$25 billion (previous year US$28 billion), of which roughly US$15 billion (previous year US$17 billion) was insured. 2015 estimates exclude loss events that occurred during the last week of December, which are still being assessed, the release added.

Natural catastrophes claimed 280 lives in the U.S. in 2015 (previous year 270), well below the annual average for the last 30 years of 580. Globally, 2015 nat cats claimed 23,000 lives, substantially more than the previous year’s figure of 7,700, but below the annual average for the last 30 years of 54,000.

Related: 2015 insured losses from wildfires in the U.S. may total US$1.75 billion: Guy Carpenter

As well, for the first time, more than a thousand loss events were recorded in a single year. “However, this is likely due to improved communication of such events,” Munich Re suggested. “In particularly benign years, many minor events are also recorded.” The year’s most devastating natural catastrophe was the earthquake in Nepal, which occurred on April 25, northwest of the capital Kathmandu, and reached a magnitude of 7.8. As is often the case in developing countries, only a fraction of the US$4.8 billion in overall losses caused by the earthquake and the aftershocks was insured: US$210 million.

Still, in terms of financial losses, the industry was “somewhat fortunate” in 2015, said Tony Kuczinski, president and CEO, Munich Reinsurance America, Inc. “However, the comparatively low losses are no reason for complacency. Near misses and time between significant events tend to decrease perception of risk. We must continue to focus on creating resiliency and saving lives through stronger building codes, better land use and protective infrastructure.” [click image below to enlarge]

Worldwide, 94% of loss-relevant natural catastrophes in 2015 were weather-related events

Munich Re also reported that 2015 saw the lowest losses of any year since 2009. Overall losses totalled US$90 billion (previous year US$110 billion), of which roughly US$27 billion (previous year US$31 billion) was insured.

In the United States alone, two tornado outbreaks in late December across the southern U.S. brought an “unfortunately destructive and deadly end to what had been a relatively quiet year for severe thunderstorms” in the country, Munich Re said. The outbreaks included two tornadoes with wind speeds up to 200 miles per hour (about 322 kilometres per hour); both tornadoes took the lives of at least 10 people each. Only 10 tornado fatalities had been recorded nationally in 2015 before these events, Munich Re said.

Two wildfires in California also caused significant property losses in the northern part of the state. The Valley Fire and the Butte Fire destroyed thousands of structures, causing losses totalling US$1.6 billion, US$1.2 billion of which was insured.

Worldwide, 94% of loss-relevant natural catastrophes in 2015 were weather-related events, Munich Re reported. Due to the strong El Niño phase, the number of 11 tropical cyclones in the North Atlantic was below the basin average since 1995 (14.8). Of these cyclones, only four reached hurricane strength (average 7.6). On the other hand, El Niño promoted the development of intense tropical cyclones in the northeast Pacific, partly due to the higher water temperatures it brings. A total of 26 cyclones (long-term average 15.6) developed there, 16 of which reached hurricane strength. Eleven (long-term average 4.1) grew to major hurricanes.

Although most storms in the northeast Pacific do not make landfall, one storm in 2015 did, and was particularly noteworthy: Hurricane Patricia became one of the strongest tropical cyclones on record globally and the most powerful in the northeast Pacific to make landfall. With sustained wind speeds of up to 200 mph, Patricia came ashore in late October close to Cuixmala in the Mexican state of Jalisco, which is luckily sparsely populated.

Overall losses from Hurricane Patricia are estimated at US$500 million, of which only a fraction was insured.