Munich Re 2016 Natural Catastrophe loss review
Princeton, NJ (July 12, 2016) – Losses caused by natural catastrophes in the first half of 2016 were significantly higher than the corresponding figures for the previous year. In total, losses by the end of June came to US$ 70bn (previous year US$ 59bn), of which US$ 27bn (US$ 19bn) were insured. The main loss drivers were powerful earthquakes in Japan and Ecuador, storms in Europe and the US, and forest fires in Canada.
Natural catastrophe figures for the first half of 2016
- Overall losses were above the inflation-adjusted average for the last 30 years (US$ 63bn), but below the average for the last 10 years (US$ 92bn).
- Insured losses were in line with the inflation-adjusted average for the last 10 years and above the average for the last 30 years (US$ 15bn).
- 3,800 people lost their lives, significantly fewer than the previous year (21,000) and the averages for the last 10 and 30 years (47,000/28,000).
- The highest losses were caused by two earthquakes on the Japanese island of Kyushu in April (US$ 25bn, of which US$ 6bn was insured).
- Of particular note were a series of storms in the US and Europe, massive forest fires in Canada and the complete absence of typhoons in the northwestern Pacific.
“These events clearly show the importance of loss prevention, such as protection against flash floods or the construction of earthquake-resistant buildings in high-risk areas,” said board member Torsten Jeworrek. “The good news is that improved building codes and a more intelligent approach by emergency services and authorities offer people much better protection than used to be the case.”
The Canadian province of Alberta suffered devastating wildfires in early May. The fires were caused by extreme heat and drought and were fanned by strong winds, quickly spreading over thousands of hectares. The town of Fort McMurray (80,000 inhabitants) had to be completely evacuated. Canadian oil-sand output fell by 40%, as production in the region was drastically reduced. Hundreds of homes burned to the ground. Direct losses from these fires totalled US$ 3.6bn, of which US$ 2.7bn was insured.
Stronger, Safer Structures
With US$ 17bn in total losses from natural catastrophes (US$ 11bn insured), natural catastrophes in the US caused almost a quarter of worldwide economic losses, and accounted for 58% of global insured losses.
Approximately US$ 12.3bn (US$ 8.8bn insured) of this was due to a series of storms in Texas and neighboring states, including destructive hailstorms in Dallas and San Antonio, and severe flooding in the Houston Metropolitan area.
“Homes and businesses incur the brunt of these losses, and property damage from this spring’s thunderstorm season remind us that a roof is a building’s first line of defense against hail and wind events. Proper roof maintenance, roofing materials and installation are all critical to helping reduce these types of losses,” said Tony Kuczinski, President and CEO of Munich Reinsurance America, Inc.
To help homeowners build safer, stronger structures in the face of increasing severe weather events, Munich Re and the Insurance Institute of Business and Home Safety (IBHS) recently launched FORTIFIED Home™ On the Go, an interactive tablet app available for free download from the iTunes Store. It walks homeowners, contractors and architects through the home strengthening process, providing information based on their specific input.
Weather extremes in Texas and other southern states are symptomatic of an El Ni�o phase, which intensifies the subtropical jet stream, which can cause an increase in severe storms in the region. Further north, El Ni�o conditions also caused warm and dry conditions in Alaska and western Canada, helping to trigger the worst wildfire in Canadian history.
One beneficial aspect of El Ni�o conditions is that it tends to reduce springtime tornadic activity over the southern Great Plains. Although the year’s thunderstorm season got off to an early start, the states of Texas, Oklahoma, and Kansas have all seen about 50% fewer tornadoes this year than in the first half of 2015. By the end of June, the number of observed tornadoes nationally was about 700, significantly below the average of 1,021 for the last ten years.
However, El Ni�o conditions have now faded, explained Peter H�ppe, Head of Munich Re’s Geo Risks Research Unit. “In the third quarter of 2016, the ENSO climate oscillation is expected to switch to a La Ni�a phase, which also has a major influence on global weather patterns. For example, La Ni�a tends to promote the formation of hurricanes in the tropical North Atlantic and a greater number of typhoons in the Philippines.”
The hurricane season in the North Atlantic also started early. In January, Hurricane Alex formed south of the Azores. The storm passed through the Azores at hurricane strength, but with minimal impacts. An additional three tropical storms have formed in the Atlantic so far in 2016, two of which made landfall in the US. However, both storms were relatively weak, causing only minor losses.
Weather events in Europe
The severe weather in Europe in May and early June was primarily triggered by a persistent low pressure system extending to high atmospheric levels over central Europe. In Germany, the very slow-moving thunderstorms triggered by this phenomenon caused powerful flash floods in many areas. Especially hard hit were parts of southern Germany such as Braunsbach in Baden-W�rttemberg and Simbach in Bavaria, where small streams were rapidly transformed into raging torrents.
In France, the storms brought floods on the Seine and its tributaries. Hardest hit was the town of Nemours, south of Paris, where the River Loing reached record water levels. Thousands of people had to be evacuated. In Paris, the Louvre and the Mus�e d’Orsay had to be closed and many artworks moved to higher storeys. However, the river remained at least two metres below the record level of 1910.
On 22 and 23 June, the Netherlands was hit by thunderstorms, bringing hailstones as large as tennis balls. The town of Someren in the province of North Brabant saw enormous losses, especially in agriculture. Countless greenhouses and many entire crops were destroyed. Initial estimates put overall losses at up to €1bn (more than US$ 1bn). These storms were linked to the highest absolute humidity ever recorded in the Netherlands.
The overall loss from the storms in Europe totalled US$ 6.1bn (€5.4bn), of which US$ 3bn (€2.7bn) was insured. Losses in Germany accounted for US$ 2.8bn (€2.6bn) of overall losses and US$ 1.3bn (€1.2bn) of insured losses.
“Scientific studies have shown that heavy rainfall has become more frequent in certain regions of Europe over the last few decades. For example, in the period 1951–2010 severe spring rainfall events that used to have a mathematical occurrence probability of once every 20 years have already increased by a factor of 1.7. Climate change is likely to have been partly responsible for this,” explained H�ppe.
Earthquakes in Japan and Ecuador
Two earthquakes on the southern Japanese island of Kyushu close to the city of Kumamoto brought the biggest losses of the first half of 2016. In the space of just two days, late on 14 April and in the early hours of 16 April, two earthquakes struck (Mw 6.2 and 7.0 respectively), destroying countless buildings and killing 69 people. Tens of thousands had to be temporarily housed in emergency shelters.
Many production facilities in the region were also damaged and had to suspend operations for several weeks. This also severely hampered production at certain car manufacturers, as they were unable to obtain important components. A major manufacturer of smartphone camera modules also had to halt production. The overall loss from the two quakes came to US$ 25bn, of which only US$ 5.9bn was insured due to the low insurance density for earthquake risks.
The greatest number of fatalities was caused by an Mw 7.8 earthquake which hit the Pacific coast of Ecuador at almost the same time as the quakes hit Japan. Many buildings were destroyed and shopping mall roofs collapsed. Nearly 700 people were killed. As is so often the case in emerging countries, a relatively small share of the overall loss of US$ 2.5bn was insured: US$ 400m.
About Munich Re
Munich Re stands for exceptional solution-based expertise, consistent risk management, financial stability and client proximity. This is how Munich Re creates value for clients, shareholders and staff. In the financial year 2015, the Group – which combines primary insurance and reinsurance under one roof – achieved a profit of €3.1bn on premium income of over €50bn. It operates in all lines of insurance, with over 43,000 employees throughout the world. With premium income of around €28bn from reinsurance alone, it is one of the world’s leading reinsurers. Especially when clients require solutions for complex risks, Munich Re is a much sought-after risk carrier. Its primary insurance operations are concentrated mainly in the ERGO Insurance Group, one of the leading insurance groups in Germany and Europe. ERGO is represented in over 30 countries worldwide and offers a comprehensive range of insurances, provision products and services. In 2015, ERGO posted premium income of €17.9bn. In international healthcare business, Munich Re pools its insurance and reinsurance operations, as well as related services, under the Munich Health brand. Munich Re’s global investments (excluding insurance-related investments) amounting to €215bn are managed by MEAG, which also makes its competence available to private and institutional investors outside the Group. For more information, visit www.munichre.com.
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