Global catastrophe loss activity in the month of June 2016 was driven by over $5 billion of economic losses due to floods, the bulk of which was in China, while U.S. severe thunderstorms resulted in over $350m of insurance industry losses, according to Aon.
Demonstrating the size of the protection gap opportunity and under-insurance in Asia once again, the month of June saw severe flooding monsoonal rains in China, resulting in widespread damage due to river flooding and killing over 130 people.
The economic cost of the flooding, caused by seasonal “Mei-Yu” monsoon rains, is thought to be over $4.4 billion, but as is typically the case in China insurance and reinsurance industry losses are expected to be low, according to the latest monthly catastrophe report from Aon Benfield’s Impact Forecasting division.
The Yangtze River basin experienced the brunt of the damage, in flooding that continued into July, resulting in damage to more than 200,000 homes in the region according to China’s Ministry of Civil Affairs.
As of the 7th July, the economic impact from the Chinese flooding is now reported to have neared the $9 billion mark, as the cost continued to rise and flooding persisted in the Yangtze river basin.
The U.S. suffered another month of severe thunderstorms and convective weather, which Aon Benfield estimates to have caused in excess of $350m of insurance and reinsurance industry losses, and an economic impact of over $500m.
Flooding also struck the U.S. in June 2016, with West Virginia suffering catastrophic flooding in several counties, affecting up to 5,500 homes and 125 businesses. Total economic losses are anticipated to be hundreds of millions of U.S. dollars, but insured losses will be mitigated by the U.S. government’s National Flood Insurance Program (NFIP).
Impact Forecasting also note, interestingly, that June 2016 saw the lowest number of June U.S. tornadoes since 1988. But despite the low incidence of tornadoes the convective storm losses were still around $350m for the insurance and reinsurance industry, demonstrating the need to understand where exposures can manifest in severe thunderstorm ILS and catastrophe bond transactions, as hail and strong straight-line winds can cause significant losses.
Adam Podlaha, Global Head of Impact Forecasting, commented; “With the continued expectation of a transition towards La Niña in the second half of 2016, the month of June provided a potential precursor to some of the global impacts typically experienced during such an ENSO phase. The enhanced seasonal monsoon rainfall across China and elsewhere in Asia was amplified as flooding caused considerable property and agricultural damage. With catastrophe models becoming more prevalent in Asia-Pacific, the insurance industry is better able to provide a clearer understanding of the financial risks that the flood peril increasingly poses.”
Impact Forecasting notes some of the other catastrophe and severe weather events to have occurred worldwide in June:
- Major flood events in India, Indonesia, Myanmar, and Ghana.
- Several outbreaks of U.S. thunderstorms which caused damage from the Rockies to the Mid-Atlantic. Aggregated economic losses were forecast at above USD500 million; and insured losses in excess of USD350 million.
- Powerful thunderstorms in the Netherlands, which cause total economic losses of above EUR520 million (USD578 million), with most of the damage sustained by farmers. The Association of Insurers reported filed agricultural claims totaling EUR130 million (USD144 million).
- An East Coast Low struck eastern Australia, killing at least four people. The Insurance Council of Australia (ICA) declared an insurance catastrophe as at least 32,000 claims were filed with payouts exceeding AUD235 million (USD175 million). Overall economic losses were even higher.
- Multiple rounds of severe storms caused damage in the Canadian Prairies.
- The Erskine Fire in California, which damaged or destroyed at least 298 homes and structures. Total economic losses were expected to exceed USD100 million.
- Tropical Storm Colin became the earliest third named storm to develop on record in the Atlantic Ocean basin when it formed on June 5. It made landfall in Florida, but caused minimal damage in the state.