Global natural disasters and severe weather events are expected to cost the insurance and reinsurance industry at least $7 billion in May, as the Fort McMurray wildfire, European and U.S. severe weather ramp up industry losses.
Reinsurance broker Aon Benfield’s risk modelling and analytics unit Impact Forecasting estimate that the final insurance loss will pass $7 billion, as the Canada wildfires are set to become the most expensive loss event in the country’s history.
The Fort McMurray wildfires in Alberta, Canada are expected to cause insured losses – including physical damage and business interruption – of over CAD4.0 billion (US$3.1 billion), according to Impact Forecasting’s latest monthly catastrophe report. This is slightly lower than the PCS estimate of US$3.52 billion released recently.
Adam Podlaha, Global Head of Impact Forecasting, explained; “The severity of the wildfire damage in Fort McMurray is an unfortunate reminder of how significant insurable losses can be from the peril. The situation in Canada has already allowed for a strong and cooperative response from both the government and the insurance industry as residents and business owners seek to assess the damage and begin the recovery process. Since this is just the sixth individual global wildfire to surpass the billion-dollar threshold for insurers, there is not a lot of precedent for a fire event of this magnitude.”
Meanwhile the severe weather and flooding in Europe including from the German-named storm Elvira hit northern Europe between late May and early June, with the most notable damage in Germany, France, Austria, Poland and Belgium where floods hit major cities, including Paris.
The overall insurance industry loss is estimated at over US$2.3 billion, based on the France (AFA) and Germany (GDV) preliminarily estimates, with economic losses expected to approach US$4.6 billion.
As we noted earlier, the AFA has now estimated up to $1.6 billion of insurance and reinsurance losses from the French severe weather and floods, but noted that this is preliminary. Meanwhile Fitch Ratings said the German floods and weather could cost as much as $1.14 billion. So it does seem likely that totals will rise, with these storms and floods so recent and waters yet to recede in some areas.
Severe convective storms once again struck the United States in May, with parts of the Plains, Midwest, and Mississippi Valley all impacted by damaging tornadoes, straight-line winds, and large hail. Storm-related flooding was also a feature again in Texas during the latter part of May.
Impact Forecasting estimates total aggregated insured losses from the severe U.S. weather in May to exceed US$1 billion.
The impacts in developed economies in May are set to be another expensive month (after April) for regional insurance firms and global reinsurance firms, with some ILS funds and other collateralised vehicles such as sidecars seeing attritional levels of loss.
Of course with reinsurance markets well capitalised the catastrophe loss experience of the globe is still well within budgets for the world’s re/insurers and ILS managers. However the aggregation of losses could be interesting to watch for later this year, particularly on reinsurance or private ILS contracts exposed to all natural perils in the U.S., or any on a global basis.
Cyclone Roanu brought torrential rainfall to the Asian countries of Sri Lanka, eastern India, Bangladesh, Myanmar, and China during May. Flooding and landslides caused the bulk of the damage and at least 105 people were killed in Sri Lanka alone. Nearly 125,000 homes and structures were damaged or destroyed across all five countries, Impact Forecasting explained, with the estimated cost of reconstruction up to US$1.7 billion, although insured losses would be much lower given low insurance penetration.
Other notable natural hazard events that hit around the globe during May include:
- Five separate instances of flooding impacted China as aggregated economic losses topped USD1.5 billion. Most of the damage was attributed to agricultural interests.
- Other major flood and landslide events in May were reported in parts of Hispaniola, Kenya, Tajikistan, Afghanistan, Rwanda, Ethiopia, India and Yemen.
- Tropical Storm Bonnie brought heavy rainfall to portions of the Carolinas and Georgia in the United States at the end of May and into June. Total economic losses were expected to be minimal.
- Earthquakes in Ecuador and China caused damages to thousands of homes and a winter weather outbreak in northern China caused damage to crops totaling USD61 million.