2012 catastrophes & man-made disasters caused $77 billion insured losses

The latest sigma study from reinsurance company Swiss Re has been published today and it shows that natural catastrophes and man-made disasters in 2012 caused economic losses of $186 billion and insured losses of $77 billion. A number of large-scale weather events in the U.S. helped to push up the insured loss total for the year, with Sandy a major contributor, making the insured loss total of $77 billion the third highest for a single year on record.

The insured loss total is much lower than 2011’s figure of $126 billion, the highest ever recorded, and it’s testament to re/insurers resilience and strong capitalisation that having two of the three most severe loss years on record in succession has not created greater flux within the market.

2012 was dominated by a number of severe U.S. weather events, led by superstorm Sandy, and the U.S. contributes $65 billion of the total insured loss figure for the year. Demonstrating the high insurance penetration in the U.S., more than half of the economic loss total of $119 billion was insured.

Kurt Karl, Swiss Re’s Chief Economist, commented; “The severe weather-related events in the US provided a reminder of the value of insurance and the vital role it plays in helping individuals, communities and businesses to recover from the devastating effects of catastrophes. However, large parts of the globe that are prone to weather extremes were not able to rely on financial relief due to low insurance penetration.”

Hurricane, or superstorm, Sandy was the largest single insured loss event of the year. Swiss Re puts the insured loss total from hurricane Sandy at $35 billion, including National Flood Insurance Program losses, and estimates $20 billion to $25 billion was insured in the private re/insurance market.

Matthias Weber, Swiss Re’s Group Chief Underwriting Officer, said; “Sandy challenged the industry with its combination of record wind field and storm surge. The possibility that such events could increase in frequency and strike densely populated regions such as the northeast US means that extreme storm-surges need to be more thoroughly understood.”

2012 also saw the highest agricultural insured loss ever recorded, with the drought in the U.S. resulting in insured losses of $11 billion, including pay-outs from the federal Multi-Peril Crop Insurance (MPCI) assistance program.

2012 also saw Italian earthquake risk highlighted as a number of events in Italy created an insured loss of $1.6 billion. This was much lower than the economic loss of $16 billion. Balz Grollimund, Swiss Re’s Head of earthquake risk, explains; “Although substantial, insured claims were only a fraction of the total cost of the event. Italy, a country with multiple seismic sources, has one of the lowest earthquake insurance penetration rates among industrialised countries with high exposure to earthquake risk.”

Here are a couple of charts from the report showing the number of events and size of 2012 losses.

Insured catastrophe and man-made losses 1970 - 2012

Most costly insured catastrophe losses of 2012

You can access the full report from Swiss Re via the press release here.