New Swiss Re Sigma Study Reviews 2003 CAT Losses

March 3, 2004

Natural and man-made catastrophes caused the deaths of more than 60,000 people worldwide last year, according to Swiss Re’s latest sigma report. Over two thirds of these were the victims of earthquakes. Overall economic losses from catastrophes were approximately $70 billion, while insured losses reached $18.5 billion.

The company’s bulletin noted that, “the number of fatalities has risen substantially from when sigma published preliminary figures at the end of last year and is now considered the seventh highest in over 30 years. The most tragic disaster in terms of loss of life was the December earthquake in the Iranian city of Bam in which 41,000 people were killed. Globally, the earthquake was the fourth largest in terms of victims since 1970. In addition the earthquake which hit the region of Boumerdès in Northern Algeria during May claimed the lives of 2260 victims”.

The earthquakes, however, caused much less in economic losses. Swiss Re found that the drought conditions in central, southern and eastern Europe produced the largest economic loss, an estimated $14 billion. Typhoon Maemi in South Korea caused around 5.5 billion.

Commenting on the long hot summer, Swiss Re said: “2003 was the hottest summer on record for many countries in Europe, and in 2002 there were heavy flash floods in parts of Europe during July and August. As the report outlines there is increasing evidence for a rise in extreme weather events, and hence in insured catastrophe losses. It also shows how the catastrophe bond market is complementing the traditional way of insuring and reinsuring catastrophes.”

“Man-made disasters” in 2003 accounted for around $12 billion in economic losses, more than half of which was due to the three-day power outage in the US during August. Insured losses, mainly from large industrial fires, explosions and the loss of space satellites
were around $2.3 billion in 2003,

“The property insurance industry bore $18.5 billion, or one quarter, of the total damage from catastrophes in 2003,” the report continued. “Last year was notable for the several billion dollar catastrophes. Six events generated insured property losses in excess of one billion dollars, together accounting for more than half of all insured catastrophe losses reported in 2003.”

In addition to Maemi Swiss Re listed them the following “major disasters:”
— April’s storms which swept across the US from the North East to the Mid-West, bringing snow and ice causing around $3.2 billion in losses.
— Over 400 tornadoes hit the US Mid-West in May costing insurers $1.6 billion.
— Hurricane Isabel struck the eastern seaboard and moved inland as far as Ontario in September causing insured property losses of $ 1.7 billion.
— The series of forest fires that hit California in October and November resulted in severe damage to property, for which Swiss Re gave no loss estimate.
— In December 2003, flash floods in the South of France caused insured losses of $1 billion.

The study concluded that “while the insured property loss figure of USD 18.5 billion is below those of recent record years, 2003 can be added to the list of costly loss years. Catastrophes have caused billions of losses in every year since the late eighties (an inflation-adjusted annual average of USD 20 billion since 1987). “

It also warned that “There are strong indications that the billion-dollar loss trend will continue, and the 2003 figures confirm this trend towards high losses, which is being driven by increasingly densely populated areas, higher concentrations of insured values and the development of endangered zones.”

The full report is available on the Swiss Re Web site – in several languages.

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