If one could use only a single word to sum up 2011, “catastrophes” best captures what this year was all about.

January started on a soggy note with large pockets of Australia under water, as floods caused insured losses of up to $3 billion. Just the next month, the Southern Hemisphere suffered again, as New Zealand saw a 6.3 earthquake that toppled buildings in Christchurch and led to claims north of $10 billion (part of a nightmarish, 12-month stretch where Kiwis experienced multiple quakes, including one in September of 2010 and another one in June of this year).

Then, for a few unforgettable weeks in the late winter and spring—from the massive Japanese earthquake and devastating tsunami that followed through the spate of tornadoes that ravaged the U.S. in April and May—it seemed like a major disaster struck every other day.

Indeed, the first half of the year wound up being one for the record books. Global reinsurer Munich Re counted 355 significant loss events in quarters one and two—which caused an all-time high of $265 billion in economic losses. In the U.S. alone, 100 events led to more than $18 billion in insured losses.

The second half, fortunately, did not see a Katrina-like event, but Mother Nature hardly let us off the hook. While Florida once again escaped the hurricane season unscathed, Irene underscored the degree of damage that can occur deep inland as it pounded, of all places, Vermont, and ultimately could lead to $4.3 billion of insured property losses.

And the first half’s floods, quakes and tornadoes were joined by summer wildfires in Texas—and then a freak October snowstorm in the Northeast, severe enough that Moody’s labeled it a “major capital event” for insurers.

The conversation around the importance of supply-chain insurance that the Japanese quake helped spark only intensified when fall floodwaters inundated much of Thailand—including nearly 10,000 factories that play a critical role in supplying parts to the automotive and computer industries.

The collective toll on underwriters was terrible. First-half net income for U.S. property-and-casualty insurers, for example, plummeted 67 percent compared to the same period in 2010. The second quarter was particularly brutal for domestic carriers with a heavy concentration in personal lines, as the twisters in Alabama, Arkansas, Oklahoma and, most memorably, Joplin, Mo., flattened homes and crushed cars.

Allstate experienced more than $2.3 billion in catastrophe losses from 30 events in that April-June timeframe. Liberty Mutual also topped the billion-dollar mark in 2Q, with $1.3 billion in catastrophe losses. By September 23, home-and-auto giant State Farm had processed just under one million claims—970,000—for the year and had paid policyholders $5 billion.

Not surprisingly, the cumulative hit of all these catastrophes did cause an overall hardening for property exposures—with Australia, New Zealand and Japan seeing prices increase by double-digit percentages.

And while none of the events in the singular were enough to end the soft market (see caption, opposite page), the aggregate effect of the losses does have the market poised for a general hardening as we enter 2012.

Special Reports /

#1 A Disastrous 2011 Sees Epic Losses Across the Globe

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