The port of Tianjin, China storage facility explosions is set to lead the way in 2015 as the largest single catastrophe or man-made disaster insurance industry loss, but the total for the year is set to come in well below average, at an estimated $32 billion, 48% below the long-term average.
Global reinsurance firm Swiss Re has published its Sigma insured loss estimates for 2015, in which it forecasts a total economic loss for the year of $85 billion, due to catastrophes and disasters, of which the insurance and reinsurance industry is set to pay for around $32 billion.
This is a lower economic loss figure than 2014’s $113 billion by 24% and also a lower insured loss figure than the $35 billion reported last year by 11%. In terms of how this stacks up against the average, it is well below. The 10-year average economic loss figure is $192 billion, while the 10-year average insured loss figure is $62 billion.
Insured natural catastrophe losses came in at just $23 billion for the year, according to Swiss Re, which is 19% below the figure seen in 2014 and a huge 58% less than the 10-year average of $55 billion.
So no solace expected for the insurance and reinsurance sector, as low levels of natural catastrophe and man-made disaster insured losses remain so far below average that sector capitalisation will not be eroded. While losses remain so low the excess capital keeps building, maintaining the pressure on rates and pricing.
2015’s disasters resulted in a greater loss of life than 2014, at 26,000 which is more than double the 2014 figure. 9,000 lives lost in the Nepal earthquake drove the increase, however only resulting in an insured loss of around $160 million.
“It was another year of many disaster events, sadly resulting in a high number of victims,” commented Kurt Karl, Chief Economist at Swiss Re. “The overall economic impact of these events was devastating in the areas affected. Often these areas are the least equipped and have a low level of insurance penetration.”
The largest insured loss of the year was the Tianjin port blasts, which Swiss Re estimates at least a $2 billion insurance industry loss. That’s actually below some of the other estimates, such as the up to $3.3 billion estimate from reinsurance broker Guy Carpenter.
Swiss Re notes that the Tianjin insured loss estimate remains subject to considerable uncertainty, especially due to the potential for contingent business interruption claims, so the final tally may get closer to the other estimates. Tianjin remains the largest single man-made insured loss in Asia.
Man-made disasters were responsible for $9 billion of the total insured loss during the year, up from $7 billion in 2014. Other industrial site fires and explosions around the world contributed another $3 billion to the total, demonstrating that events like Tianjin are perhaps on the rise.
On the natural catastrophe and weather disaster side, a winter storm in the U.S. in February was the largest single insured event at $2.1 billion, but another year of low hurricane activity in the Atlantic kept the overall loss tally low.
Thunderstorms and flooding in Texas in May, which caused an insured loss of around $1.3 billion, followed by the Valley Fire in California at $1 billion and European windstorm Niklas also at $1 billion, round up the top five natural catastrophe insured loss events of the year.
While insurance and reinsurance industry losses have been relatively benign in recent years that cannot last. Despite the well capitalised nature of the industry, that capital is here to pay for the losses that occur due to catastrophes and disasters and at some point in the future it will be called on.