Swiss Re has just released its sigma report on catastrophe losses for 2014, which confirms that total global economic losses from natural catastrophes and man-made disasters were around $110 billion, compared to global insured losses of about $35 billion, which Swiss Re notes were “below the $64 billion-average of the last 10 years.”
The report points out, however, that there were “189 natural catastrophes worldwide last year, the highest on sigma records. Disasters claimed more than 12,700 lives in 2014, one of the lowest ever in a single year, while “severe thunderstorm losses are trending upward.”
The $110 billion economic loss figure is $28 billion lower than the $138 billion in total disaster losses recorded in 2013, and “well below the previous 10-year annual average of $200 billion. “Of these total economic losses, $101 billion were due to natural catastrophes, with cyclones in Asia Pacific causing the most damage,” the report said. “Of the $35 billion in global insured losses last year, $28 billion were attributed to natural catastrophe events. Weather events in the US, Europe and Japan cause most insured losses.”
Kurt Karl, Swiss Re’s Chief Economist, commented: “The frequency of catastrophic events appears to be increasing, with a record number of natural catastrophes last year.” For example, a series of severe thunderstorms triggered sizable losses in both the US and Europe last year. “In May, a spate of severe storms with hail in the US resulted in the largest insured loss event of the year, with insurance claims of $2.9 billion.
“In Europe in the following month, the low pressure system Ela brought large and damaging hail to parts of France and Belgium, and strong winds in Germany. The combined insured losses were $2.2 billion, making Ela the second most expensive hail event in Europe on sigma records.”
The report also points out that “harsh winters in the US and in Japan were another major cause of insurance claims in 2014. The US experienced multiple storms with heavy snow and long stretches of freezing temperatures. Insured losses from all winter storms in the US were $2.4 billion, more than double the average of the previous 10 years.
“The largest loss event was a storm in January that impacted 17 states, with snow falling as far south as Florida, leading to overall insured losses of $1.7 billion. Meanwhile in Japan, a severe cold snap in mid-February brought the heaviest snow in decades, killing 26 people and injuring many more, primarily in road accidents. The insured loss total was estimated at $2.5 billion.”
The hurricane season, however, was quite subdued in the North Atlantic in 2014, with no major hurricane making US landfall for the ninth year in succession. Swiss Re explained that this “was the main reason for the overall below-average insured losses last year. In contrast, there were 20 named storms in the eastern Pacific, the most since 1992.
Of those, Hurricane Odile struck Mexico’s Baja of California in September, causing the “the biggest event loss. The region is a tourist destination with many hotels and commercial properties and consequently, insurance penetration is relatively high. The insured losses were $1.7 billion, making Odile the second largest insured loss event ever in Mexico, after Hurricane Wilma in 2005 which caused insured losses of $2.1 billion.”
The lack of insurance coverage in many areas remains a problem. Swiss Re cited the low pressure system Yvette, which “brought very heavy rain to Serbia, Bosnia and Croatia last May.” In some areas it was the “heaviest downpour in 120 years. Several dams failed and the ensuing floods and debris flows destroyed houses, infrastructure and crops. There were 82 deaths, the largest loss of life from a natural catastrophe event in Europe in 2014, and total losses were estimated to be $3 billion, mostly uninsured. Italy also endured a very wet year, with a series of flash floods events causing overall economic losses of more than $1 billion, also largely uninsured.”
The report added, however, that “there are areas which are underinsured in the US also. In August last year, the South Napa earthquake caused structural and inventory damage totaling $0.7 billion, particularly in the numerous barrel storage facilities of the local wine industry. However, the insured loss was just $0.16 billion.”
Lucia Bevere, co-author of the study, said: “In spite of high exposure to seismic risk, insurance take-up in San Francisco County and in California generally is still very low, even for commercial properties. That’s why insured losses, in certain areas, can be surprisingly low when disaster events happen.”
Severe thunderstorms continue to generate mounting losses, which the sigma study addresses in a special chapter on severe thunderstorms, which are also called severe convective storms. Such storms include tornadoes, hail, thunder, heavy rains and flash floods.
Swiss Re explained that “generally speaking, a storm is classified as ‘severe’ based on the threshold where damage is expected to occur, typically winds of 90 km/26 miles per hour and/or hail of 2 cm [app ¾ inch] in diameter, or more in countries using the metric system and 1 inch or more in US reference terminology.”
The report also notes that the “total costs and insured losses of severe convective storms have been on an upward trend over the last 25 years. This is mainly due to rising losses in the US where the frequency of storms (particularly tornadoes) and insurance penetration are highest, and in Europe where hail storms and flash flooding happen often.
“The global insured losses from severe convective storms rose by an average annual rate of 9 percent in the period 1990 and 2014. Insured losses from all-weather events in the same period rose by 6.6 percent on the same basis. In the US alone, insured losses from severe convective storms averaged $8 billion annually between 1990 and 2014. And from 2008, those losses have exceeded $10 billion every year, including in 2014 when insured losses were $13 billion, the fourth highest on sigma records.”
Source: Swiss Re