Throughout 2014 a total of 258 natural disasters or catastrophes struck globally, causing total insured losses of $39 billion, a significant 38% dip below the ten-year average of $63 billion, according to Aon Benfield’s Impact Forecasting unit.
Reinsurance broker Aon Benfield’s catastrophe model development and review team, Impact Forecasting, has released its 2014 Annual Global Climate and Catastrophe Report.
The report looks a the economic and insured losses impact of international natural disasters over the last 12 months and, 2014 saw economic losses follow the trend of insured losses, totaling a vast 37% below the ten-year average of $211 billion, at $132 billion.
The catastrophe department’s study looks into the trends of each peril that affected the world during 2014, stating that a severe thunderstorm in Europe in June, and the U.S. in May were the costliest insured loss events of the year, at $3 billion and $2.9 billion respectively.
On the economic loss side relentless September flooding in Northern parts of India and Pakistan resulted in the largest economic loss of the period, at a staggering $18 billion, the fifth year running that Pakistan has been devastated by a billion dollar flood event.
Speaking about the findings and the impact catastrophe losses have on the re/insurance market, Aon Analytics Chief Executive Officer (CEO) Stephen Mildenhall, said; “The secular increase in catastrophe losses since 1980, which is broadly in-line with global GDP, continues to be an engine of growth for the insurance industry. With its abundant capital and sophisticated risk management tools, the industry is better positioned than ever to deliver on its core mission of providing critical risk transfer products that enable growth and development all around the world.”
The 2014 catastrophe review explores the economic and insured loss totals in respect of their geographical stance, highlighting that despite three-quarters of natural disaster losses took place outside of the states, the country still made up 53% of 2014’s global insured losses.
Aon attributes this largely to the region’s high levels of insurance penetration, compared to the vulnerable but low levels achieved in the Asia-Pacific territory.
Interestingly, Artemis recently covered Swiss Re’s preliminary/estimates on the 2014 insured cat and disaster losses, which the company put at $34 billion.
And perhaps even more noteworthy, is the insured catastrophe losses figure provided by Munich Re, just $31 billion, as reported by Artemis at the time.
While Swiss Re’s estimates and Munich Re’s findings are still well below the ten-year average, it’s interesting that the figures offered differ from Aon’s by as much as $8 billion. Of course this could be explained by differing methodologies for collecting the data, as well as how each company works out an ‘industry wide loss’ total.
Various factors influence and drive weather loss trends, as noted by the Impact Forecasting team in their report. “There are many critical variables that are involved in the discussion of increasing weather losses, including climate, population, urbanization, economics, and insurance penetration,” reads part of the report.
Fatalities, insured losses and economic losses are likely to increase in line with population growth, and the continued migration to coastal regions. Despite 2014 insured losses being dramatically below the ten-year average, a lack of global insurance penetration is still very apparent, again highlighting the opportunity this provides for reinsurers, insurers, catastrophe bonds, insurance-linked securities (ILS) and investors.