Insured catastrophe losses just $31 billion in 2014: Munich Re

2014 global insured natural catastrophe losses came in at just $31 billion, down from $39 billion a year earlier, according to reinsurance firm Munich Re. Overall economic losses were down as well at $110 billion, compared to $140 billion in 2013.

The reinsurer has released its review of 2014 natural catastrophe events today, which shows that the level of losses suffered globally are down again,, well below average, both in economic and insured terms. At the same time the level of fatalities has fallen, with 7,700 deaths from natural catastrophe events in 2014, compared to 21,000 in 2013.

“Though tragic in each individual case, the fact that fewer people were killed in natural catastrophes last year is good news. And this development is not a mere coincidence. In many places, early warning systems functioned better, and the authorities consistently brought people to safety in the face of approaching weather catastrophes, for example before Cyclone Hudhud struck India’s east coast and Typhoon Hagupit hit the coast of the Philippines,” commented Munich Re Board member Torsten Jeworrek. “However, the lower losses in 2014 should not give us a false sense of security, because the risk situation overall has not changed. There is no reason to expect a similarly moderate course in 2015. It is, however, impossible to predict what will happen in any individual year.”

The level of losses suffered are well below the inflation adjusted averages from the last ten years or thirty years, Munich Re explains. The ten-year average for economic losses is $190 billion, and for insured losses $58 billion, while the 30 year averages are $130 billion and $33 billion respectively.

The $31 billion of insured natural catastrophe losses was led by the Japan snowfall event, which caused an insurance industry loss of $3.1 billion. Other major events included hailstorm Ela in Europe with an insured loss of $2.8 billion and the unusually cold winter in the U.S. caused insured losses of $2.3 billion.

Interestingly, frequency of natural catastrophe losses is above average, despite the lower level of losses. Munich Re recorded 980 loss-related natural catastrophes, higher than the average of the last ten and 30 years (830 and 640). Whether this reflects greater resilience or simply a different type of catastrophe event, or a mix of the two, deserves further analysis.

Hailstorms and severe weather or thunderstorm is one peril that is increasing in importance and impact, Munich Re explains.

“Loss-related severe weather caused by thunderstorms, technically known as convective events, is demonstrably increasing in various regions like the USA and Central Europe. Hailfall can cause extreme losses. Measures to reduce loss susceptibility, for example that of buildings, are therefore of the utmost importance,” said Peter Höppe, Head of Geo Risks Research at Munich Re.

El Nino is of course another factor in weather patterns, particularly when it comes to the continued benign Atlantic tropical storm environment.

“The patterns observed are well in line with what can be expected in an emerging El Niño phase. This characteristic of the ENSO (El Niño Southern Oscillation) phenomenon in the Pacific influences weather extremes throughout the world,” Höppe continued.

He explained that most scientists expect a light to moderate El Niño phase to persist until mid-2015. “Following the below-average incidence in 2014, this could increase the frequency of tornadoes in the USA. If the El Niño phase does, in fact, end towards the middle of the year, there would be no cushioning affects from the ENSO oscillation in the main phase of the tropical storm season.”

The level of losses provides no respite to reinsurance companies hoping for a reversal to recent catastrophe rate declines. From a humanitarian point of view this is great news though, with another very low loss year and a low levels of human life impact as well. It would be fascinating to understand what influence the world’s increasing resilience to natural disasters is having on this trend.

More details can be found via the Munich Re website here.