U.S. Natural Catastrophe Events Approaching Record Year

This year may prove to be a record-setting one in terms of insurance losses as natural catastrophe events hit numbers not seen in decades, but that would not necessarily translate into a market turning event, insurance representatives said.

During a Web seminar sponsored by Munich Re today, executives from the insurer and Robert P. Hartwig, president and chief economist for the New York-based Insurance Information Institute, discussed the insurance losses suffered from natural catastrophes so far this year and their implications for the industry.

Carl Hedde, head of risk accumulation for Munich Re America, said that using figures gathered by the insurer, within the United States the number of incidents and insurance losses the industry is seeing is reaching record proportions.

For the first half of this year, the number of incidents is exceeding all of the past number of events going back to 1980 with 109 natural disasters so far this year. Last year was the next closest with more than 90 events.

In terms of insured losses, Mr. Hedde pointed out that thunderstorm losses stand at $8.1 billion for the first half of this year, exceeding all previous years going back to 1980.

He warned that while wildfire losses at this point stand at an estimated $30 million, a relatively low figure compared to past years, most of the losses from wildfires occur during the third and fourth quarters.

Peter Hoppe, head of GeoRisk Research and Corporate Climate Center for Munich Re, noted that worldwide “we are on the upper edge of frequency in the past 29 years.”

While the United States and Europe have seen record-setting natural catastrophe events, Asia has experienced the largest devastating natural events from storms and earthquakes.

Mr. Hoppe said winter storms in China during January and February produced the highest insured losses so far this year at $1.6 billion, followed by winter storm Emma in Europe producing $1.5 billion in losses and February’s severe storms and tornados in the United States rounding out the top three at $900 million.

Global climate change is contributing to this increase in extreme atmospheric events, he said, and human activity is adding to these natural perils.

Mr. Hartwig noted that while insured losses are well beyond the past two years, the industry is still a long way away from the losses it experienced in 2005 from Hurricanes Katrina and Rita.

He said whatever losses lie ahead, the industry remains in a very good financial position to withstand severe losses with $522 billion in policyholder surplus.

A worrisome development is the increase in insured value along the Atlantic and Gulf Coasts that has risen from $7.2 trillion in 2004 to $8.9 trillion last year.

“These are very significant sums,” Mr. Hartwig noted.

When asked about whether the current loss trends could halt the decline in insurance rates, Mr. Hartwig said “it is too soon to speculate.” He indicated that no matter how significant the weather-related catastrophe losses could be, it probably would not result in a marketwide turn from soft pricing.