Global catastrophe events during October are expected to incur economic losses of more than $10 billion, as historic flooding inundated South Carolina, typhoons impacted Asia and the record-breaking hurricane Patricia made landfall in Mexico, according to Aon Benfield.
International reinsurance broker Aon Benfield’s Global Catastrophe Recap for October 2015, estimates economic losses of more than $10 billion during October, further highlighting the need to narrow the protection gap in underdeveloped and developed regions of the planet.
According to the report the costliest event in the month of October was typhoon Mujigae, with expected economic losses of $4.2 billion the event became the costliest tropical cyclone of 2015, making landfall in parts of China and the Philippines.
As you’d expect, the insurance industry loss from Mujigae is expected to be minimal, underscoring the protection gap once again in Asia.
Outside of Asia, where insurance penetration levels are typically low and therefore the gap between economic losses post-event is usually higher than in more developed markets, like parts of the EU and the U.S., record-levels of rainfall in South Carolina caused unprecedented flooding in the region.
The flooding event in the U.S. state of South Carolina and the eastern U.S. killed at least 19 people, and Aon Benfield predicts economic losses of at least $2 billion, following extensive damage to residential and commercial properties, infrastructure and vehicles.
Public and private insurers have already reported over $400 million of insurance losses from the U.S. flooding, with at least $350 million from insurers and another $100 million plus expected from the NFIP and USDA crop insurance coverage.
Some impact to reinsurance layers is possible, if a particularly exposed primary insurer takes a large share of the $350 million insurance company loss, but impact to reinsurers or to ILS players will likely be minimal.
Intense and damaging flood events were recorded elsewhere in the world, highlights the report, including Brazil, Guatemala, Italy, Algeria, Myanmar and other parts of the U.S., although neither of these individual flood episodes is expected to cause economic losses of beyond $1 billion.
As record-setting levels of rainfall occurred in North America, South America and in particular Mexico, saw hurricane Patricia make landfall, the strongest tropical cyclone ever recorded in the Western Hemisphere, with sustained winds of 200 mph, and a central pressure of 879 millibars.
Fortunately, the track of hurricane Patricia once it made landfall as a Category 5 storm near Cuixmala, Mexico, avoided many built-up populous areas, meaning economic losses are expected to be at around $300 million, a figure that would have been substantially higher had the storm shifted slightly to the north or south once on land.
Insured losses from Patricia are expected to be minimal, given low penetration. But the MultiCat Mexico catastrophe bond, which provides reinsurance to FONDEN the natural disaster fund in Mexico could pay out either $50 million or $100 million, depending on the final calculation agent report.
Hurricane Joaquin also occurred during the month, battering parts of the Bahamas before tracking just past Bermuda, Aon Benfield predicts economic losses to total roughly $100 million.
The costliest event in Europe during October from natural catastrophes came from flooding in France, as a number of rivers and streams bursts at the banks after severe thunderstorms on the French Riviera.
The flooding killed at least 19 people and is expected to incur economic losses of more than $1 billion. This flood event is expected to have caused up to $720 million of insurance loss from 60,000 claims, a loss big enough to potentially result in some reinsurance impact.
Back to the Asia Pacific region, and again with the Philippines, super typhoon Koppu is expected to have caused economic losses of roughly $235 million, after damaging approximately 138,000 homes and claiming the lives of at least 58 people.
Catastrophe losses of note elsewhere in the world include the magnitude -7.5 earthquake that struck northern Afghanistan, and also damaged parts of Tajikistan, India and Pakistan. Economic losses from the earthquake are predicted to surpass $100 million.
The report notes that as El Niño intensified globally, drought conditions considerably worsened across Papua New Guinea, causing economic damages of more than $60 million.
More than $10 billion of economic losses from catastrophe events in October further highlights the need for greater insurance penetration levels globally, and not just in underserved, underdeveloped territories like the Asia Pacific and Latin America.
This point is underlined by the fact that the second costliest event during the month occurred in the U.S., from record-setting flooding. While the amount of rainfall may have been unprecedented the high volume of economic losses shows just how underinsured some of the world’s peak perils still are, like flood, in some of the most developed markets in the world.
And the $4.2 billion economic loss from typhoon Mujigae, signals just how important risk transfer is in mitigate the impact, building resilience and ultimately closing the gap between insured and economic losses post-event.