Munich Re Analyzes 2009 Nat Cats; A Lot, But Few Big Ones

December 30, 2009

A report from Munich Re confirms that losses from natural catastrophes “were far lower in 2009 than in 2008 due to the absence on the whole of major catastrophes and a very benign North Atlantic hurricane season.”

However, the reinsurer also found that the “total number of destructive natural hazard events was above the long-term average, 850 being recorded in all.” Cumulatively there were substantial economic losses of around $50 billion and insured losses amounted of approximately $22 billion. Those figures are comparatively small compared to 2008, when, economic losses totaled $200 billion and insured losses were $50 billion.

By way of further comparison, Munich Re found that “the average number of natural hazard events with relevant losses over the past ten years was approximately 770 per annum. Economic losses came to around $115 billion on average and insured losses $36 billion. There were some 75,000 deaths per year due to natural catastrophes on average.” Both the economic losses and the death toll from natural catastrophes in 2009 – around 10,000 – were well below average.

“However, we should make no mistake: despite the lack of severe hurricanes and other mega catastrophes, there were a large number of moderately severe natural catastrophes,” stated Prof. Peter Höppe, Head of Munich Re’s Geo Risks Research. “In particular, the trend towards an increase in weather-related catastrophes continues, whilst there has fundamentally been no change in the risk of geophysical events such as earthquakes.”

The report also pointed out that there were a “high level of individual severe-weather losses in the USA in 2009.” Three events alone each caused insured losses of over $1 billion. Overall, “severe weather events accounted for 45 percent of global insured losses.

“In the USA, losses due to heavy thunderstorms accompanied by hail, torrential rain or tornados rose in the decades between 1980 and the present from $4 billion to $10 billion a year on average, taking inflation into account.” Prof. Höppe noted that the “initial analyses indicate that, apart from socio-economic factors, this is already due in part to climate change.”

Winter Storm Klaus, which hit northern Spain and southwest France between January 23 and 25 with winds of up to 195 km/h |117 mph], ranked as the costliest single event of 2009. It produced meter-high waves [app. 3 feet] on the Atlantic coast and caused loss and damage to numerous buildings and vehicles. Over a million people suffered power cuts. In Spain, a large number of photovoltaic systems were damaged. “Although the area affected was relatively small by winter-storm standards, insured losses nevertheless came to $3 billion (€2.4 billion) and economic losses to $5.1 billion (€4 billion),” said the report.

An earthquake that shook the Indonesian island of Sumatra on 30 September claimed the highest death toll of 2009. Although the magnitude 7.6 earthquake occurred 80 kilometers [48 miles] below ground, tens of thousands of houses collapsed in the city of Padang, 45 kilometers [27 miles] from its epicenter, and in the surrounding area. Nearly 1,200 people were killed.

Storms in Asia also caused many deaths, the Philippines being the worst affected, although Vietnam and Taiwan were also hit when three severe typhoons (Morakot, Ketsana, Parma) struck, causing widespread destruction and claiming over 1,700 lives.

The turmoil in Asian waters is in sharp contrast to the “benign” North Atlantic hurricane season. Munich Re pointed out that “although warm water temperatures in the tropical North Atlantic produced conditions favoring an above-average hurricane season, only nine named storms were recorded, three reaching hurricane force. The figures were thus not only well below the average for the warm phase that has persisted since the mid-1990s (14.3 named storms, 7.5 hurricanes) but also below the long-term average (10.8 named storms).”

According to initial assessments, the El Niño phenomenon is likely to have had a mitigating effect on cyclone formation. In El Niño conditions, upper-atmosphere wind speeds over the Atlantic change, impeding the formation of cyclones. “The long-term hurricane risk is not apparent from a single season. Many experts are convinced that climate change has already increased hurricane exposure”, Prof. Höppe noted.

Thus despite the respite in 2009, Munich Re said it “continues to assume that hurricane activity over the next few years will fluctuate around the average for the North Atlantic warm phase, which has now lasted for some 15 years.”

In the Indian Ocean and West Pacific, this year’s tropical storm season was also slightly below average. Nevertheless, the year ended with a super-cyclone that battered Australia’s northwest coast just before Christmas. For a time, Cyclone Laurence was upgraded to the maximum level, Category 5. However, the regions in its path were for the most part uninhabited. If a town had been hit, the losses would probably have been substantial, but fortunately there was relatively little property damage. [See also IJ web site – ].

“Torsten Jeworrek, Munich Re Board member responsible for global reinsurance business, drew attention to the marked increase in major weather-related natural catastrophes worldwide since 1950, the number now having more or less tripled,” said the report. Economic losses from weather-related natural catastrophes in the period since 1980 totaled approximately $1,600 billion [$1.6 trillion] (in original values).

He also stated: “Climate change probably already accounts for a significant share. In the light of these facts, it is very disappointing that no breakthrough was achieved at the Copenhagen climate summit in December 2009. At Munich Re, we look closely at a multitude of risks and how best to handle them. Risks that change in the course of time are especially hazardous. Climate change is just such a risk of change.”

Losses caused by climate change will continue to increase in the future. “We need as soon as possible an agreement that significantly reduces greenhouse gas emissions because the climate reacts slowly and what we fail to do now will have a bearing for decades to come,” Jeworrek warned.

As a consequence Munich Re said it would “now drive forward its own initiatives with even greater commitment – investments of up to €2 billion [$2.87 billion] in renewable energy, for instance, or the Desertec desert-power project.”

“We will do our utmost to ensure that DII GmbH, the Desertec project planning entity, can put forward finished plans in the next three years. Munich Re will, of course, also be involved in their implementation – as an investor and insurer,” Jeworrek added.

Source: Munich Re –

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