Disaster insurance2011 disasters: $116 billion in insured losses, record economic losses of $370 billion
Figures confirm that 2011 was the second-highest catastrophe loss year ever for the insurance industry: 2011 saw the highest economic losses in history, at $370 billion; the insurance industry experienced the second-largest insured losses ever, at $116 billion; 2011 also brought the highest insured earthquake losses, at $49 billion; flooding in Thailand resulted in the highest insured losses ever for a single flood event, at $12 billion
Swiss Re’s latest sigma study reveals unprecedented economic losses of $370 billion from natural catastrophes and man-made disasters in 2011. Despite immense insured losses of $116 billion (a 142 percent increase over the previous year) arising from record earthquake and flood losses, the insurance industry weathered the year well and played a key role in risk management and post-disaster recovery financing.
Highest ever recorded economic losses
Swiss Re says that in 2011, total economic losses to society due to disasters (both insured and uninsured) reached an estimated $370 billion, compared to $226 billion in 2010. The earthquake in Japan, the largest known in terms of magnitude to have ever hit the country, accounted for 57 percent of 2011’s economic losses. Altogether, natural catastrophe insured losses came to around $110 billion, while losses from man-made disasters were around $6 billion, making 2011 the second-highest catastrophe loss year ever for the insurance industry.
Kurt Karl, Swiss Re’s chief economist, says: “Last year saw extraordinary and devastating catastrophic events. The earthquakes in Japan, New Zealand, and Turkey, as well as the floods in Australia and Thailand, were unprecedented and brought not only massive destruction but also the loss of thousands of people’s lives. Yet two-thirds of the staggering $370 billion in economic damage will be shouldered by corporations, governments, relief organizations, and ultimately individuals, pointing to the still widespread lack of insurance protection worldwide.”
Record-breaking earthquake insured claims
Due to the extreme magnitude of the event (Mw 9.0), the 2011 Japan earthquake cost the insurance industry an estimated $35 billion, making it the most expensive earthquake on record. “Because Japan‘s earthquake insurance protection is very low, particularly for commercial properties, the insurance industry will bear only 17 percent of the total losses. Had Japan been more fully insured, 2011 would certainly have been the most expensive year ever also in terms of insured losses,” says Lucia Bevere, Swiss Re Senior Catastrophe Data Analyst and co-author of the study. In New Zealand, where earthquake insurance penetration is high, particularly for residential properties, the February earthquake (Mw 6.3) – the third most expensive in history — triggered further insurance claims of $12 billion, covering 80 percent of economic losses.
Unprecedentedly high flood losses
The floods in Australia, the country’s worst natural disaster ever in terms of losses, triggered insured claims of over $2 billion. At $12 billion, insured claims from the flood in Thailand are the highest ever recorded for a river water flood event. “Flood losses can be just as tremendous as earthquake and storm losses. The flooding in Thailand is a painful reminder that, given the high risk of flooding in many countries, other parts of the globe could be prone to similar or even bigger losses,” says Jens Mehlhorn, head of Flood Perils at Swiss Re and co-author of the study.
Mild hurricane season caps high U.S. insured losses
Swiss Re says that in addition to earthquakes and floods, an unparalleled tornado season in the United States caused insured catastrophe losses of over $25 billion. “Despite the exceptional tornadoes and Hurricane Irene, a relatively moderate hurricane season kept overall insured losses in the United States lower than the record year of 2005, the year in which hurricanes Katrina, Wilma and Rita contributed the lion’s share of that year’s total global claims of $123 billion,” adds Bevere.
The insurance industry weathered the events well
The insurance industry proved highly effective in weathering the extreme events of 2011. Despite historic losses and a challenging financial environment, the industry played a key role in post-disaster recovery financing, bringing much-needed funds to affected populations, businesses, and governments. The events, however, revealed increasing risk accumulation, particularly in emerging markets. “To support the industry going forward, Swiss Re will enhance its CatNet information system by including more detailed river flood hazard zones. The update, to be released in spring 2012, will enable underwriters and risk managers to more accurately assess flood risks on a global level,” adds Mehlhorn.