Natural catastrophe losses have soared to a four year high after devastating earthquakes and powerful storms shook the globe in 2016, lifting insured catastrophe losses for the year to $50 billion, according to Munich Re.
Economic losses totalled US$ 175bn, a figure two-thirds higher than 2015 losses and nearly matching 2012 figures of $180bn.
At 70% the protection gap, which is the gap between economic losses and those covered by insurance or reinsurance, remained substantial; only around 30% of the losses, some US$ 50bn, were insured.
Munich Re member of the Board of Management, Torsten Jeworrek, said: “Losses in a single year are obviously random and cannot be seen as a trend.
“After three years of relatively low nat cat losses, the figures for 2016 are back in the mid-range, where they are expected to be.”
Overall losses and insured losses were at levels above the inflation-adjusted average for the past ten years; US$ 154bn and 45.1bn respectively.
Despite insured catastrophe losses being above average in 2016, the $50 billion paid by insurance and reinsurance capital for events during the year remains far below the level of losses required to create any turn in the market or to put upwards pressure on pricing.
Jeworrek continued; “The high percentage of uninsured losses, especially in emerging markets and developing countries, remains a concern.
“Greater insurance density is important, as it helps to alleviate the financial consequences of a catastrophe for more people.
“With its risk knowledge, the insurance industry would in fact be able to bear a much greater portion of such unpredictable risks.”
The frequency of loss events in 2016 was significantly above the ten-year average of 590, with 750 relevant loss events such as earthquakes, storms, floods, droughts and heatwaves, according to the Munich Re database.
Asia was hardest hit with the most expensive natural catastrophes of the year: in April two earthquakes on the southern Japanese island of Kyushu close to the city of Kumamoto resulted in overall losses of $31bn, the proportion of insured losses was just under 20%.
North America experienced its highest rate of loss occurrences since 1980, with 160 recorded events.
Hurricane Matthew was the most serious US event, which caused the death of 550 people in Haiti and heavy damage on the east coast; overall losses totalled $10.2bn, with over a third of this figure being insured.
Head of Munich Re’s Geo Risks Research Unit, Peter Hoeppe, said; “A look at the weather-related catastrophes of 2016 shows the potential effects of unchecked climate change.
“Of course, individual events themselves can never be attributed directly to climate change.
“But there are now many indications that certain events – such as persistent weather systems or storms bringing torrential rain and hail – are more likely to occur in certain regions as a result of climate change.”
North America suffered from extreme weather hazards, including wildfires in Canada and major floods in the southern US states in summer.
The main causes of the Fort McMurray Canadian wildfires were a mild winter with less snow than usual and spring heatwaves with ensuing droughts; the overall losses were at $4bn, with more than two-thirds of losses insured.
In August, US floods triggered losses totalling $10bn, around a quarter of which was insured.
The high number of flood events, including river flooding and flash floods, was exceptional and accounted for 34% of overall losses, compared with an average of 21% over the past ten years.
European storms triggered flash floods with Germany and the Paris region hard hit with losses totalling $6bn, around half of which was insured.
8,700 lives were lost as a result of these natural catastrophes, far fewer than the 25,400 in 2015.
The past year was the year with the fewest catastrophe related deaths, with the exception of 2014, in 30 years – according to Munich Re, one of the world’s leading reinsurance companies.