Loss from storm Ela hits $2.5B. 2014 insured catastrophe losses reach $17B

The world’s largest reinsurer Munich Re has provided the highest insurance industry loss estimate for European severe hail and wind storm Ela, which struck Germany, France and Belgium on 9th June, in an update on 2014 insured natural catastrophe losses.

The first estimates for storm Ela came from the German insurance industry association GDV which said it had counted claims of nearly $900m (€650m) from the countries insurers. Then the French Federation of Insurance Companies added another $1.25 billion (€900m) of insured loss from the insurers in its country, taking the total estimate to around $2.15 billion.

Now Munich Re has provided an insured loss estimate for Ela featuring data from losses in Belgium as well. The reinsurer said that overall losses across Germany, France and Belgium amounted to $3.1 billion (€2.3 billion), of which $2.5 billion (€1.8 billion) will be paid by the insurance industry.

That puts June’s hail storm Ela as the second highest insured catastrophe loss of the first-half of 2014, according to Munich Re. The reinsurer said that natural catastrophe losses around the globe in the first-half of 2014 caused an economic loss of $42 billion and insured losses of $17 billion.

These numbers are well below the long-term average for the last ten years, of $95 billion in economic loss and $25 billion of insurance industry losses. Munich Re counted 490 loss-relevant natural catastrophe events in the first six months of the year, but thankfully deaths from natural catastrophes were well below the long-term averages.

“Of course, it is good news that natural catastrophes have been relatively mild so far,” commented Torsten Jeworrek, Munich Re’s Board member responsible for reinsurance. “But we should not forget that there has been no change in the overall risk situation. Loss minimisation measures must remain at the forefront of our considerations. They make absolute sense from a macroeconomic perspective, as lower subsequent losses mean that they mostly generate savings of several times the investment amount. And they protect human lives.”

Leading the first-half 2014 insured loss natural catastrophe events were the Japanese snow storms in February which caused over $2.5 billion of insurance losses. The next highest insured loss is now wind and hail storm Ela, which at $2.5 billion but only a month ago could actually rise, as claims continue to be filed, to become the largest insured loss of the year so far.

The next highest insured loss events were all from the U.S. severe winter cold weather and storms, with one period accounting for approximately $1.7 billion of insured losses alone. Following that the U.S. severe thunderstorm and tornado season losses begin to feature, led by a period from 18th to 23rd May which caused $1.6 billion of insured losses. Another period of U.S. severe thunderstorms in late April caused $1.1 billion of insured loss.

Through the rest of 2014 Munich Re said that El Niño could factor more into catastrophe and weather losses, with a development of ENSO conditions still forecast to occur.

“With the contrary effects of El Niño and La Niña, ENSO can influence weather patterns in many parts of the world”, said Peter Höppe, Head of Munich Re’s Geo Risks Research Department. “It currently looks as though a moderate El Niño will develop by the autumn, with warm water from the South Pacific moving from west to east, thus shifting wind systems and precipitation across the Pacific basin.”

El Niño conditions will change the expected patterns of natural catastrophe and weather losses, putting more focus potentially on increasing U.S. tornado losses, greater numbers of northwest Pacific typhoons while U.S. hurricane activity typically decreases.

“This gives a different distribution of losses across regions. Globally, our loss database NatCatSERVICE records no significant differences in overall losses in moderate El Niño years when compared to neutral years, whereas losses are significantly lower in years with a strong El Niño,” added Höppe.

Munich Re also warns that if a strong El Niño occurs the chances of a strong La Niña in the following year increases, which could result in higher Atlantic hurricane activity in that year.

Reinsurers will be set for further reporting of good profits as natural catastrophe losses remain low. This will temper the effect of lower pricing, allowing quarterly financial reports to continue to be positive.

The insured loss from storm Ela could rise further as there remain some insurers still to report their loss exposure. The exposure for some collateralized writers of large European reinsurance programs likely remains, there could still be an impact to some ILS players who continue to participate in these programs.