Global reinsurer Munich Re has published its half-year report on the natural catastrophe activity experienced around the globe in the first-half of 2012 and how natural catastrophe losses have impacted the insurance and reinsurance market. After a near record year of insured losses in 2011, this year has been subdued by comparison with moderate losses to date. Munich Re says that up to the end of June there have been $26 billion of economic losses which results in approximately $12 billion of insured losses.
The U.S. has dominated the natural catastrophe loss statistics so far in 2012, and as much as 85% of total insured losses worldwide are attributed to U.S. catastrophe events with tornadoes and wildfires featuring heavily.
Losses up to the end of June were well below the six month average of recent years. The ten-year average for economic losses for the first six months of the year is $75.6 billion, so this year is way down. On insured losses the ten-year average is $19.2 billion so again quite a lot more than the $12 billion Munich Re reports for the first-half of 2012. Deaths from natural catastrophes have also been below average, with 3,500 so far this year compared to the average of the last ten years which is 53,000.
“Losses in the first half of 2012 were comparatively low. It is in line with expectations that extreme and more moderate years will balance each other out in the course of time”, commented Torsten Jeworrek, Munich Re Board member responsible for global reinsurance. “The role of insurers is to set premiums appropriate to the risks in the long-term, taking into account all such fluctuations. In this respect, insurers can also do something towards mitigating the loss burdens by providing comprehensive information and offering specific prevention incentives for reducing the vulnerability of buildings and infrastructure to damage.”
Interestingly, Munich Re’s report puts some insured loss numbers against U.S. tornado events in the first half of the year. The five costliest natural disasters of the first six months of the year were all outbreaks of tornadoes and severe weather in the U.S. One event between the 2nd and 4th March is said to have caused $2.35 billion of insured losses, another on 28th-29th April is put at over $1 billion. These top five tornado events are estimated to have caused $5.885 billion of insured losses between them. That’s quite a large toll, although not as severe as 2011’s tornado losses. However it does make you wonder whether it is getting close to worrying any severe thunderstorm or tornado catastrophe bonds yet, particularly if you also factor in losses from some of the hail events we’ve seen lately. We’ll update you if we hear of any concerns about tornado cat bonds.
Peter Höppe, Head of Munich Re’s Geo Risks Research unit, noted; “Overall, most of the severe thunderstorm-related outbreaks with tornadoes affect a limited area, and may cause serious damage locally but are not comparable in scale to events like severe hurricanes. However, due to the number of events, the aggregate annual loss amounts can attain the level of a major hurricane landfall, as seen last year.”
“One fact that stands out from the statistics is the increase in the number of tornadoes registered as time goes on, but this is mainly due to better documentation. However, overall in the USA over the past four decades, we can see a rise in losses from convective events, i.e. severe weather events with windstorm, tornadoes, hail, lightning and torrential rain – even when the figures are adjusted to take into account factors like increasing concentrations of values and inflation. One possible explanation could be changes in meteorological conditions, and particularly increased atmospheric moisture content, also due in part to climate change”, Höppe continued.