Amid all the talk of insurers enjoying a milder catastrophe year compared to 2011, the year 2012 will still be an above-average year for insured cat losses, industry officials say.
“As we review the [natural catastrophe] headlines for 2012, the words heat, wind and water come to mind as we describe the natural catastrophe events in the U.S.,” says Carl Hedde, head of risk accumulation department at Munich Re America.
In an online presentation titled “2012 Natural Catastrophe Year in Review,” sponsored by Munich Re, Hedde says U.S. insured losses in 2012 totaled $58 billion, far above the $27 billion average for 2000 to 2011.
Superstorm Sandy is estimated to cost the insurance industry approximately $25 billion, and it is the worst storm to hit the northeast United States since the Great New England Hurricane of 1938, Hedde notes.
Adding to the year’s insured losses, thunderstorms in the U.S. caused in excess of $14 billion, despite a quiet year for tornadoes.
The year’s extended drought, affecting up to 60 percent of the United States, could amount to insured losses of up to $17 billion. However, that figure remains only an estimate because farmers are not paid for their losses until after the growing season, says Hedde. It is the worst drought to hit the United States in 25 years, he adds.
Wildfires were also a major contributor to insured losses in 2012, says Hedde, causing close to $600 million in insured losses.
Reviewing U.S. natural catastrophe insured losses going back to 1980, 2012 was the second-highest year on record only exceeded by close to $200 billion in losses in 2005, the year of Hurricane Katrina, according to Munich Re.
From a global perspective, Ernst Rauch, head of Munich Re’s corporate climate center, says that Sandy, which also impacted the Caribbean, topped the list of the top five largest natural catastrophe events of 2012 with $50 billion in overall economic losses and 210 fatalities. Insured loss was unchanged at an estimated $25 billion.
The drought in the United States, running from June through September, came in second, accounting for $20 billion in economic loss.
Two earthquakes in Italy that struck in May, taking 18 lives and causing $16 billion in economic loss, cost Italian insurers $1.6 billion, the largest loss that nation’s insurance industry has ever suffered, says Rauch.
Flooding in China took 151 lives and caused economic losses of $8 billion. Insured losses stood at $180 million.
Rounding out the top five, severe storms and tornadoes in the United States caused 41 deaths and $5 billion in economic loss. Insured losses amounted to $2.5 billion.
Rauch notes that 2012 will also be remembered for the bulk of insured losses coming from the North America region. Of the $65 billion in insured global losses, 91 percent of it came from North America, far above the 1980-2011 average of 65 percent.
One positive note about 2012, Rauch says, is that fatalities were far below the average of 106,000 (2002-2011) at 9,500. He attributed this to the fact that most disasters struck in industrialized and developed countries, as opposed to underdeveloped nations where people are more vulnerable.
Turning to the economic strength of the industry, Robert Hartwig, president of the Insurance Information Institute says that insurers are “very strong from a financial perspective.”
“For insurers, there is no fiscal cliff because they have the resources in place before a disaster strikes,” says Hartwig. He says the industry has claims-paying capital of $583 billion and should remain strong even after this year’s losses.