Even though property and casualty insurers had to contend with relatively few hurricanes and other extreme catastrophes in 2007, the increased prevalence of smaller natural disasters throughout the year resulted in a 50 percent increase over 2006's worldwide insured losses.

That's according to a report from Munich Re, one of the world's largest reinsurers. These figures might be surprising, especially considering the fact that both 2006 and 2007 failed to feature typical large-loss scenarios like those in 2004 and 2005, when multiple hurricanes devastated the Gulf and Florida coasts. So why the 50 percent jump? Munich Re attributed it to activity level, saying that 950 natural catastrophes were reported last year, the highest number since 1974 and 100 more than in 2006.

Specifically, Munich Re said that worldwide catastrophe losses reached $75 billion in 2007, with $30 billion of that recorded as insured losses. In comparison, the company said that 2006 had $50 billion in catastrophe losses, with just $15 billion covered by insurance. Placed in recent historical context, however, and it becomes clear that while 2007 might have featured the most events in several decades, it still failed to approach the loss levels of 2005, the year of Hurricane Katrina. In that year, insured losses topped $220 billion.

“The figures confirm our expectations and endorse our insistence that risks be consistently written at adequate prices, despite years with comparatively low losses as in 2006, — said Dr. Torsten Jeworrek, Munich Re board member, in a release. — The trend in respect of weather extremes shows that climate change is already taking effect and that more such extremes are to be expected in the future. We should not be misled by the absence of mega catastrophes in 2007.”

Munich Re said that the most severe events in terms of insured losses occurred in Europe, peaking last January with Winter Storm Kyrill, an event that had wind speeds that topped 60 mph and gusts up to 120 mph. The storm, which largely affected Poland, the Czech Republic, and Austria accounted for nearly eight percent of worldwide catastrophe losses. Flooding in England and heavy hailstorms/tornadoes in Germany also significantly affected worldwide insured losses.

“All the facts indicate that losses caused by weather-related natural catastrophes will continue to rise,” continued Jeworrek. “As a leading reinsurer, we are ready to deal with this. Ultimately, however, it is society as a whole which bears the cost – in the form of higher insurance premiums or infrastructure repairs financed by taxes.”

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Insured Catastrophe Losses Rise Dramatically

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