Worldwide natural catastrophes and man-made disasters cost insurers $26 billion last year–less than half of the industry's payout in 2008–but 2009 was an anomaly and carriers likely face even bigger exposures down the road, according to a report by Swiss Re.

In 2009, the total economic loss for catastrophes–which killed 15,000 people last year–was $62 billion, compared with $269 billion for 2008, when insured losses totaled $52.5 billion, the company said in its latest “sigma” report.

Insured losses, Swiss Re said, were below average due to a calm U.S. hurricane season. The portion of insured losses last year attributable to 133 natural catastrophes was put at $22 billion, while losses from 155 man-made disasters totaled $4 billion.

North America's insured loss was listed at more than $12.7 billion.

The death toll was far below the 240,500 Swiss Re counted in 2008. The highest number of 2009 fatalities was in Asia, where nearly 9,400 people died due to catastrophes.

Swiss Re's report said the $36 billion gap between economic and insured losses for 2009 suggests that a lack of insurance coverage leaves many individuals and governments vulnerable after a catastrophe. With yearly losses increasing, so is the need for insurance coverage, the carrier suggested.

The report noted that a higher value concentration of wealth in loss-prone regions and a trend toward more insurance coverage, plus the effects of global warming and the related higher risk of extreme weather conditions have contributed rising exposures and loss trends.

“The probability that we see nat-cat losses as low as those in 2009 is less than 35 percent,” Swiss Re's chief economist, Thomas Hess, noted in a statement. “We have already seen significant events in 2010, with winter storm Xynthia in Europe or the earthquakes in Chile and Haiti.”

Estimates of the Chile quake's insured loss have been as high as $10 billion, with a possible $30 billion economic loss. Insured loss estimates for Xynthia have reached $4 billion.

“Given their high volatility, [2010] losses could easily be three-to-five times what they were in 2009,” said Mr. Hess. “In 2005, insured losses set a record when they soared to $120 billion. I would not be surprised if this record is broken in the not-too-distant future.”

Six 2009 events each triggered insured losses in excess of $1 billion, Swiss Re reported. The costliest event was the European winter storm Klaus, which struck France and Spain in January and led to insured losses of EUR2.35 billion (nearly $3.4 billion under current exchange rates), the carrier said.

The report said secondary perils such as flooding, landslides, hail storms, tornadoes, winter storms outside Europe, snow and ice storms, droughts and bush fires are important loss sources but receive little attention, with most of the focus on earthquakes, hurricanes and winter storms.

Indeed, in 2009, more than half of the natural catastrophe loss burden was caused by secondary perils, the report said.

Jens Mehlhorn, co-author of the study, suggested in a statement that “more advanced probabilistic risk assessment models would help to better gauge and price the risk of secondary perils.”

Examining earthquakes, the report noted that since 1970, 360 damaging earthquakes have claimed over one million lives.

Brian Rogers, another co-author of the sigma study, commented that “the deadliest earthquakes tend to occur in less economically developed countries and in regions that are usually densely populated and prone to earthquakes. These countries typically have low per-capita income and fewer resources for prevention- and post-disaster management.”

The report added that “even in developed economies, the current earthquake insurance take-up rates in heavily exposed areas seldom surpass 20 percent.”

Concerning global warming, the report predicted that climate change effects would lead to stronger rainstorms, more flooding and more powerful hailstorms, all causing more insured damages. Swiss Re warned that in addition to heavy storms in Europe, climate change may also result in more U.S. tornadoes.

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Global &#039;09 Insured Cat Losses Down By More Than 50 Percent

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Global '09 Insured Cat Losses Down By More Than 50 Percent