Asia Pacific accounts for over two-thirds of 2011 insured catastrophe losses

by Artemis on December 29, 2011

Of the approximately $108 billion of natural and man-made catastrophe insured losses experienced during 2011 the Asia-Pacific region accounted for over two-thirds of them, according to data published by Guy Carpenter today. This broke a historical trend of U.S. based events dictating the movement of property catastrophe reinsurance pricing, something borne out by the large rate rises experienced in much of Asia-Pacific while the U.S. is seeing lower increases.

This trend, for insured loss totals to rise dramatically in the Asia-Pacific region, is one which is only going to increase as the region becomes better developed, insurance penetration rises and catastrophe events increasingly cost more for the global re/insurance market.

The Thai floods are an excellent example of this rising exposure. A similar flood event ten years ago would have been a very small loss event for the global re/insurance market compared to the $10 billion plus that is expected from this years flooding. In years to come a repeat flood event of this magnitude could cost a great deal more in insured losses.

This graph from Guy Carpenters report shows how the major events broke down across the four quarters of 2011 and compares each quarters losses to those of 2010.

Significant catastrophic losses 2010-2011

Significant catastrophic losses 2010-2011 (Source: Guy Carpenter & Co. LLC, Property Claims Services, Insurance Council of Australia)

David Flandro, Global Head of Business Intelligence, Guy Carpenter & Company, said; “The historical losses of 2011 revealed the spread of catastrophe exposures around the world – including in areas which have not historically been considered peak zones. Most large insured losses in 2011 happened outside of the United States, reinforcing the theme of the internationalization of losses and the importance of understanding exposures. Predictions that the La Niña event is likely to persist into 2012 and could again influence worldwide natural hazards next year add to the uncertainty.”

Of course the flipside to an increasing level of exposure and potential for loss in Asia-Pacific is that there is an opportunity for global re/insurers to acquire new business and write more premiums in the region. This trend will continue as the economies of Asian countries grow rapidly. This increase in re/insurance business in the region could also translate into an opportunity for the catastrophe bond market to step in to cover these peak perils, providing capital markets capacity to the growing exposures.

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