2011 saw the highest economic losses from natural catastrophes and man-made disasters on record and the second highest insured losses ever, according to the latest sigma report from reinsurer Swiss Re. Total economic losses leaped from the $226 billion experienced in 2010 to a massive $370 billion in 2011, while insured losses came in at $116 billion with $110 billion attributed to natural catastrophes and $6 billion to man-made disasters.
A number of record loss events contributed to the high insured loss total with the Japanese earthquake and tsunami event causing $35 billion of insured losses, contributing to a record year for earthquake insured losses which totalled $49 billion. 2011 was also a record year for flooding insured losses with Australia contributing $2 billion from their floods and the flooding in Thailand becoming the largest flood insured loss ever at $12 billion.
The insurance industry weathered these events well according to Swiss Re, with the industry playing a key role in disaster financing and recovery. However events in 2011 have revealed increasing risk accumulation particularly in emerging markets.
Kurt Karl, Swiss Re’s Chief Economist, said; “Last year saw extraordinary and devastating catastrophic events. The earthquakes in Japan, New Zealand, and Turkey, as well as the floods in Australia and Thailand, were unprecedented and brought not only massive destruction but also the loss of thousands of people’s lives. Yet two-thirds of the staggering USD 370 billion in economic damage will be shouldered by corporations, governments, relief organisations, and ultimately individuals, pointing to the still widespread lack of insurance protection worldwide.”
The accumulation risk is only going to increase as insurance penetration increases in areas prone to natural catastrophes. The Thai floods should be a wake up call to the industry as they show the potential for huge losses in regions which were once thought low impact to the re/insurance sector. The potential impact of these regions will continue to grow.
Also in the news today is the fact that the Lloyd’s insurance market has its costliest year ever in 2011 with £12.9 billion of claims causing a loss to the market of £516m.
Here are some key statistics on the loss events of 2011 from Swiss Re’s sigma report which you can download here.