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Global reinsurer Swiss Re has announced its preliminary economic loss estimates for the first half of 2017 – and the results are significantly lower than last year.
In the first six months of the year (H1), global and man-made catastrophes resulted in $44 billion in losses, much lower than the $117 billion loss estimates in the first half of 2016. This is due to several factors, including fewer and less intense catastrophe events.
Insured losses from disasters were $23 billion in H1 2017, down from $36 billion in H1 2016. Of the $44 billion total global economic losses in H1 2017, natural catastrophes accounted for $41 billion, while the remaining $3 billion came from man-made disasters.
“Global disaster losses were below their 10-year average, both on an economic and insured level. They were among the lowest in the last 10 years,” said Thomas Holzheu, chief economist, Americas, Swiss Re. “There was a lower number of events and no multi-billion dollar loss events.
“As a general long-term trend, uninsured losses are growing (in relation to economic activity as measured by GDP), and we see a shift of exposures moving to emerging economies, which are less resilient in coping with the economic disruptions caused by large catastrophes.”
Swiss Re found the largest losses were caused by severe thunderstorms in the US. Four separate severe weather events between February and May each caused losses of more than $1 billion. The most costly event was the four-day long storm in May, which caused severe hail damage to properties in Colorado and other southern and central states.
“Severe convective storms were the costliest peril due to record high number of thunderstorms in the US, including hailstorms and tornado outbreaks,” Holzheu told Insurance Business. “Losses from this peril were among the highest of the past 10 years, due to an early start of the tornado season and a high number of tornadoes, in addition to intense hail activity. Individually, though, none of these events crossed the multi-billion dollar loss threshold.”
The four convective storms in the US caused $8.2 billion in economic damages, of which 78% was insured, according to Holzheu. He said many households and businesses in the US are insured against storms, which is why the insurance protection was high compared to the longer term global average.
Swiss Re’s sigma data shows economic losses from natural disaster events averaged $171 billion each year in the last decade, with 72% uninsured. Holzheu added: “Insurance penetration is much lower in most emerging countries and also in the US for certain important perils such as flood and earthquake.”
The US has the largest market for natural catastrophe insurance in the world. It is highly competitive and is open to lots of international insurers and reinsurers.
“The market has digested recent larger hurricane losses such as Irene and Sandy without a major disruption. In addition, there is an increasing role of alternative capacity (such as cat bonds) in providing capacity and adding resilience to the US market,” said Holzheu.
“Overall, larger markets for catastrophe reinsurance are well integrated globally through international reinsurers. Some re/insurance markets in smaller economies can be less resilient due to more restrictive regulations and more closed financial markets.”
