NU Online News Service, July 27, 3:33 p.m. EDT
Thunderstorms accounted for the bulk of $11.1 billion in insured natural catastrophe losses in the United States for the first half of 2009, according to figures released today by Munich Re Group.
Losses from thunderstorms totaled $6.1 billion for the first six months of this year, outpacing losses from floods ($7 million), winter storms ($565 million) and wildfires ($120 million).
The release of those figures assembled by Munich Re was part of a Web seminar sponsored by the insurer. Speakers were Carl Hedde, head of risk accumulation for Munich Re America; Peter Hoppe, head of Geo risks research/corporate climate center Munich Reinsurance Co.; and Robert P. Hartwig, president of the Insurance Information Institute.
Mr. Hedde said there were 90 natural disaster events over the first half of this year in the United States. While the year is not on a record-setting pace, the number of losses is almost equal to annual totals for five of the past 10 years, he said.
Thunderstorm losses for the first six months are $1 billion above average, he said–the fifth highest total since 1980.
Worldwide, there have been 380 loss events, primarily weather-related, noted Mr. Hoppe, with 63 percent of total insured losses coming from the United States and 27 percent from Europe. The reason for these loss levels, he said, was because of the high insurance density in those regions.
Losses for the first half of 2009 were "moderate," he said, adding that historically, the bulk of losses occurs in the second half of the year, primarily caused by hurricanes.
Globally, the costliest insured loss this year was January's Winter Storm Klaus with $2.3 billion in losses, followed by severe storms and tornadoes in the United States in February at $1.4 billion and U.S. April storms and tornadoes at $990 million.
Despite the severe recession, insurers have been able to operate normally, Mr. Hartwig pointed out, noting that while there have been a growing number of bank failures, the same has not happened in the insurance industry.
Insurers have experienced a decline in earnings as their investment portfolios were hurt in the economic downturn, but that has had limited effect on capacity levels, he said. Capacity has dropped 16 percent from its high in 2007, amounting to around $66 billion, Mr. Hartwig said.
"That is a significant amount, but it does not compromise the claims paying ability of insurance companies," he said, because the industry was well capitalized going into this economic crisis.
Despite the economic crisis, the industry has attracted new capital, he went on to say–about $11 billion in 2008 and $1 billion in the first quarter of this year.
In answer to a question from National Underwriter, Mr. Hartwig said that while giving no direction to pricing, there are two markets. Personal lines are seeing some increases, including state property insurance programs that are raising prices on catastrophe risks. On the commercial side, he said the trend continues to be down, but less than prior years.
He said premium rates on the commercial side are being hit by the decrease in exposures from the drop in clients' business. The insurance industry will begin to see rate improvements once the economy picks up and clients once again purchase more insurance.
"Anything from new construction to greater head count in payroll will eventually begin to utilize some of this spare insurance capacity that exists out there today," observed Mr. Hartwig. "It is part rate, but it is also part recession that is contributing to the weak premium numbers."
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