European windstorm Niklas losses in the billions: Aon Benfield

by Artemis on April 13, 2015

Adverse weather events consisting of hail, heavy rain, snow and intense windstorms such as Niklas devastated parts of Europe during March, causing expected economic and insured losses in the billions, according to Aon Benfield’s Impact Forecasting unit.

Reinsurer Aon Benfield’s catastrophe model development division, Impact Forecasting has published its latest ‘Global Catastrophe Recap’ report for March 2015.

The report notes; “That Windstorms Mike and Niklas swept through western and central Europe at the end of March, killing at least nine people and causing widespread damage.

“Based on preliminary damage reports from each country and local insurers, it is expected that total economic and insured losses are each likely to exceed USD1.0 billion.”

The majority of damages from windstorms Mike and Niklas occurred in Germany, but parts of the UK, Netherlands, Switzerland, Austria and Poland also witnessed hurricane-force winds as a result of the storms, notes the report.

Artemis recently discussed risk modelling firm AIR Worldwide’s initial insurance industry loss estimate for European windstorm Niklas, which the company put between €1 billion and €1.9 billion ($1.059 billion – $2.012 billion).

The range of losses provided by AIR Worldwide is quite wide, with the top end figure reported roughly double that of Aon Benfield’s estimate, although the latter does state the losses will likely surpass the billion-dollar mark without offering a maximum.

Head of Impact Forecasting, Adam Podlaha said; “The costly losses endured from windstorms Niklas and Mike further highlight the importance of using catastrophe models to forecast the peril in Europe. Impact Forecasting successfully released an event footprint within 48 hours of Niklas’ passage, expected to be the costliest non-U.S. event of Q1 2015.”

The coverage of European perils has been an increasing feature of both the catastrophe bond market and perhaps now more importantly the collateralized reinsurance market in recent years, providing some geographical diversification to portfolios.

But despite widespread damages caused by windstorms Niklas, the severity and resulting insurance or reinsurance industry losses aren’t expected to get anywhere close to troubling exposed catastrophe bonds.

Intense weather patterns in March elsewhere in the world also highlighted the need and benefits of disaster risk financing tools globally, as the strongest cyclone to make landfall anywhere in the world since Typhoon Haiyan, Cyclone Pam, struck the South Pacific.

Cyclone Pam claimed at least 11 lives and caused huge property and structure damage and destruction across Vanuatu.

But thanks to the region’s membership to the Pacific Catastrophe Risk Insurance Pilot (PCRIP) it received a rapid, preliminary payout of $1.9 million, showing the advantages of parametric risk financing schemes.

Interestingly, Cyclone Pam reached Vanuatu during the same month Verisk Maplecroft, an international risk analytics company and part of Verisk Analytics, declared Vanuatu city Port Vila, as the most exposed city to natural disasters in the world.

In the U.S., the Impact Forecasting report notes that winter weather damages caused total economic losses of $175 million, with the insured loss total surpassing $110 million.

This is significantly lower than the $1 billion+ insured loss figure reported by Aon Benfield as a result of winter storms in the U.S. during February, covered at the time by Artemis.

Farming and construction facilities in the North and South of China were impacted by hail events during March, resulting “in forecast economic losses of CNY1.7 billion ($275 million),” states the report.

China also felt the brunt of several moderate earthquakes during the month of March, with economic loss estimates equalling roughly $40 million.

Impact Forecasting’s Podlaha, concluded; “As we move towards the historically costliest quarters of the year for the insurance industry in Q2 and Q3, clients will have the chance to learn more about Impact Forecasting’s modelling and software capabilities at one of our five upcoming global conferences.”

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