$30bn insured, $98bn economic, natural disaster losses in H1: Aon Benfield

by Artemis on July 20, 2016

The first-half of 2016 has seen both insured and economic natural disasters come in above the long-term average, with the insurance and reinsurance industry on the hook for $30 billion of a total $98 billion economic impact, according to Aon Benfield.

Global insurance and reinsurance industry losses from catastrophes, natural disasters and severe weather events in the first six months of 2016 are at their highest level since 2011, according to reinsurance broker Aon Benfield’s risk modelling and analytics unit Impact Forecasting.

At $30 billion, insured losses are just below the 10 year average of $31 billion, but are 27% higher than the 16 year average from 2000 to 2015 of $24 billion.

The above long-term average nature of catastrophe losses in the last six months has been reflected in insurance and reinsurance market loss disclosures in recent weeks, as well as through impacts to a number of insurance-linked securities (ILS) funds and to collateralized reinsurance sidecar vehicles.

Economic losses, which came in at $98 billion for the first-half of the year, are also above the 16 year average, but are 13% lower than the ten year average of $112 billion. Economic losses are also at their highest level since 2011.

The figures quoted are preliminary at this time, Aon Benfield notes, and subject to change as more clarity emerges on recent catastrophe losses.

Interestingly, with 2011 being an outlier year of catastrophe losses around the globe, Aon Benfield have analysed the data using a median analysis and find that on that basis both economic and insured losses are well above average so far in 2016.

Using this median analysis natural disaster losses in the first-half of 2016 were 100% above the 2000-2015 median on an economic basis ($49 billion) and 54% higher on an insured loss basis ($19 billion).

H1 2016 catastrophe insurance and economic losses

H1 2016 catastrophe insurance and economic losses - Source: Aon Benfield

Earthquake was the costliest peril on an economic basis, accounting for $34 billion or 30% of the economic loss total.

On an insurance and reinsurance industry loss basis, unsurprisingly it is severe convective storm that was the top peril causing losses, with $12.3 billion, or 42%, of the insured loss total down to convective weather. Interestingly, Texas was the site of 55% of the severe convective storm losses so far this year.

The fact that 30% of the total economic natural disaster loss was insured is slightly higher than average, largely due to the U.S. being so prevalent in the loss events so far this year and the impact of convective storms.

The 10 year average is for 28% of the economic loss to have been insured, but with the U.S. accounting for 47% of global insurance losses sustained by public and private insurance or reinsurance entities in the first-half of 2016 it’s no surprise that the ratio of insured to uninsured has risen.

The report also states that there were at least six individual billion-dollar global insured loss events, with five weather related, during the first half of 2016. At least 22 separate billion-dollar economic loss events occurred, including at least 20 that were weather-related. Regionally, the U.S. led the way with nine billion-dollar economic loss events, APAC had seven, Americas three, and EMEA also three.

Steve Bowen, a Director in Aon Benfield’s Impact Forecasting team, commented on the figures; “The first half of 2016 ended up as the costliest on an economic and insured loss basis since 2011. The year has already been highlighted by a significant earthquake sequence in Japan, the Fort McMurray wildfire in Canada, flooding in Western Europe and a series of extensive hailstorms in the United States.

“With the pending transition to La Niña during the second half of the year, there will be a heightened focus on the risk of flooding across parts of Asia and hurricane landfall in the Atlantic Ocean basin. The financial toll of weather disasters during La Niña years has historically been among the costliest on record, and so we will wait to see whether this trend plays out in the coming months.”

The full report on first-half 2016 natural disaster losses can be downloaded here (PDF format).

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