Losses due to natural catastrophes and man-made disasters were below the long-term trend in 2006. Of the USD 48bn in catastrophe-related economic losses, USD 15.9bn was covered by insurance. Insurers have modified their catastrophe simulation models, where appropriate, to bring them into line with higher expected damage – especially in the light of the record loss years 2004/05 and an increasingly volatile climate.
8 Mar 2007 – In 2006, natural catastrophes and man-made disasters claimed more than 31 000 human lives worldwide. Swiss Re’s latest sigma study, “Natural catastrophes and man-made disasters in 2006”, recorded 349 catastrophes. Unlike in the two previous years, natural catastrophes affected mainly developing countries where property values are low, resulting in comparatively light economic losses of USD 48bn. Low insurance penetration in developing countries also meant that only one third of these economic losses in 2006 was actually covered by insurance.
Insured losses low at USD 15.9bn
The insurance burden incurred in 2006 was USD 15.9bn, in line with sigma’s provisional year-end estimate, despite some late-reported loss events. Overall, 2006 brought property insurers the third-lowest losses of the past 20 years – only 1997 and 1988 were less expensive (after allowance for inflation). In all, natural catastrophes cost insurers USD 11.8bn and man-made disasters around USD 4bn. These low loss figures were attributable mainly to the calm hurricane season in the US and the absence of any highly damaging events in Europe. Three events ran into the billions: two tornados in the US in April and a typhoon in Japan in September.
Higher losses expected going forward
Over the past decades, insured losses have shown a rising trend, due mainly to weather-related catastrophes. This also reflects an increasing concentration of property values and urban encroachment into highly-exposed regions.
Insured catastrophe losses 1970–2006
New: The natural catastrophe losses since 1970 also include US flood losses insured via the NFIP.
Source: Swiss Re sigma No 2/2007
Going forward, the effects of global warming are also likely to aggravate the loss situation. Climatologists assume that shifting climate zones could lead to weather events that have hitherto been restricted to extreme regions, spreading to other parts of the world. Insurers have modified their catastrophe simulation models, where appropriate, to bring them into line with higher expected damage – especially in the light of the record loss years 2004/05 and an increasingly volatile climate.
sigma now also takes into account NFIP flooding damage in the US
As of this issue of sigma, Swiss Re’s catastrophe statistics also include flood losses in the US covered via the National Flood Insurance Program (NFIP). The historical series as of 1970 have been revised accordingly. As a result of this change, the insured loss of hurricane Katrina for example has been revised upward to USD 66bn (USD 49bn without NFIP).
Swiss Re is the world’s leading and most diversified global reinsurer. The company operates through offices in over 30 countries. Founded in Zurich, Switzerland, in 1863, Swiss Re offers financial services products that enable risk-taking essential to enterprise and progress. The company’s traditional reinsurance products and related services for property and casualty, as well as the life and health business are complemented by insurance-based corporate finance solutions and supplementary services for comprehensive risk management. Swiss Re is rated “AA-” by Standard & Poor’s, “Aa2” by Moody’s and “A+” by A.M. Best. www.swissre.comTags: Natural Catastrophes, natural disaster losses, sigma, Swiss Re