When the word “catastrophe” is used in relation 2012, several different events come to mind: Superstorm Sandy; Hurricane Isaac; many tornadoes; rampant wildfires all around the south, west, and central US; and severe flooding in many areas. Naturally, the thought of all of these weather-related disasters would seemingly correlate to millions–or billions–of dollars in losses, both overall and insured. And that’s correct. But what may be surprising is that 2012, although record setting in many ways, did not top any lists when it came to loss amounts.
According to industry publication Insurance Networking News, “Globally, natural catastrophe losses totaled $160 billion in 2012, and insured losses totaled $65 billion. The year’s highest insured loss in 2012 was caused by Superstorm Sandy, estimated at $25 billion, Munich Re said,” according to INN. The web site went on to quote a source at Munich Re: ‘The heavy losses caused by weather-related natural catastrophes in the USA showed that greater loss-prevention efforts are needed,’ said Torsten Jeworrek, Munich Re Board member. ‘It would certainly be possible to protect conurbations like New York better from the effects of storm surges. Such action would make economic sense and insurers could also reflect the reduced exposure in their pricing.’”
Interestingly, although 2012 was unarguably a rough year for catastrophe losses and all those affected by said catastrophes, it wasn’t even close to the year 2011–the year with the most severe losses on record. While, globally, there is an average of $165 billion for overall losses over the last 10 years, 2011 alone reported overall losses of $400 billion dollars. Insured losses, last year, were at $119 billion compared to the insured loss average of just $50 billion from the last 10 years.
The reason for 2011’s costliness, one is safe in assuming, was the infamous earthquake and tsunami that rocked Japan in March 2011. This is in relation to 2012’s Superstorm Sandy which, while disastrous and responsible for $50 billion in overall losses and $25 billion in insured losses last year, cannot compete with the devastation in Japan.
However, Sandy wasn’t the only factor responsible for losses last year. INN quoted Munich Re again in discussing the drought experienced in the United States in 2012: “‘only in the Dust Bowl years, from 1934–1936, had yields been decimated by a worse drought,’ Munich Re said. Crop losses in the United States totaled $20 billion in 2012; $15 billion to $17 billion was covered by the public-private multi-peril crop insurance program, making it the largest loss in U.S. agricultural insurance history. On average, insured losses are $9 billion.”
2012 also introduced a pair of disastrous earthquakes in Italy ($16 billion in overall losses and $1.6 billion in insured losses) and wrought several damaging tornadoes in the U.S. ($5 billion in overall losses and $2.5 in insured losses).
It’s easy to look at our laundry list of natural disasters and expect high numbers for losses but it’s important to look at loss differences from year to year as well. We may have been hit hard by Sandy and drought but, in reality, overall losses were less than half of last year’s – and left insured losses under half of the 2011 statistics.
Suffice it to say, it’s clear that the overall trend shows rising loss numbers in both categories. So what does that mean for 2013? We need to be prepared to deal with a bigger influx of claims than ever before.