2017 severe weather event related insurance and reinsurance losses have been largely dominated by a series of severe U.S. hailstorms and tornadoes which each incurred costs in the billions, although overall, global catastrophe losses have been well below the ten-year average, Munich Re said in its natural catastrophe review for January to June 2017.
One of these severe thunderstorms, hitting the U.S. in May, holds the record for the single costliest event for re/insurers in 2017, leaving insured losses of $1.8 billion, and overall losses of $2.2 billion.
Peter Höppe, Head of Munich Re’s Geo Risks Research, said the unusual atmospheric conditions in the U.S. in the first-half of 2017 created “perfect conditions for powerful supercell thunderstorms, which frequently bring major hailstorms and tornadoes.
“The number of tornadoes observed in the first quarter of 2017 was twice as high as the average for the last ten years.”
However, on a global scale, natural catastrophe losses this year have been far below average, falling starkly to just over one-third of 2016’s $111 billion mid-year losses.
Due to the most costly natural catastrophes hitting the U.S. where insurance density is high, the proportion of insured to uninsured losses was far above average this year.
Tony Kuczinski, President and Chief Executive Officer (CEO) of Munich Reinsurance America, said; “During the first half of 2017, we continued to clearly see the impacts of tornado 18 July 2017 and hail events in the United States in terms of damage to homes and business, which ultimately result in direct and indirect losses to the economy.
“Munich Re continues to participate in important research being conducted to improve the way we build our homes and businesses, with the ultimate goal to make them more resistant to the impacts of weather related events.
“Preventative measures can reduce vulnerability, and preparing for loss or damage can increase resilience. These measures protect assets and save lives.”
Approximately half, or $21.5 billion out of $41 billion of losses were uninsured in 2017, whereas the ten-year average is for more than two-thirds of losses to be uninsured.
Insured losses totalled $19.5 billion so far this year, and last year, when the re/insurance industry was dealt above average natural catastrophe losses, this figure reached $32 billion, so much closer to the ten-year average of $29 billion for the yearly mid-way mark.
Munich Re Board member, Torsten Jeworrek, said the U.S. severe thunderstorms highlight “just how important it is for insurers to have in-depth knowledge of natural catastrophes and how these are affected by climatic changes.
“This is true of both natural climatic changes and those that are man-made. Insurers not only help to overcome losses, they also improve our understanding of what triggers them. This is a fundamental basis for preventing future losses.”
Munich Re said Cyclone Debbie, which hit the Queensland coast of Australia in late March, was the second-most expensive event of 2017, with overall losses of $2.7 billion and insured losses of $1.4 billion.
February and March floods in Peru caused by the coastal El Niño phenomenon, were the highest overall losses witnessed this year, amounting to costs of $3.1 billion.
The Peruvian government is now left to pick up the pieces, struggling to repair its economic and social losses with only one tenth, or $380 million, of the total figure being insured.
Commenting on the protection gap, the difference between economic and insured losses post-event, Jeworrek said; “Emerging countries in particular would benefit from higher insurance density as it would allow them to recover more quickly from the financial impact of natural disasters.”
In contrast to the U.S., the highly developed European market has been among regions to see below average overall and insured losses, with these figures at $5 billion and $1.9 billion, respectively.
Munich Re’s NatCatSERVICE database has recorded 350 loss-relevant natural catastrophes by the end of June 2017, less than last year’s figure of 390 but above the ten-year average of 310 events.
Natural catastrophe losses well below average at the 2017 mid-way point have created a foundation for a remaining six months of perhaps softer than expected pricing and market conditions, meaning re/insurers will have to continue to rely on underwriting discipline, expansion into new lines of business, emerging markets, and InsurTech innovation to achieve long-term growth and profitability in the face of soft market conditions.
