Munich Re Estimates 2002 Insured Losses from Catastrophes at $11.5B

January 6, 2003

In a yearly review, Munich Re calculates the overall economic losses from natural and man-made catastrophes in 2002 at a staggering $55 billion, compared to $35 billion last year. However, the world’s biggest reinsurer estimated that insured losses would be around $11.5 billion, roughly equivalent to last year’s figure.

The most costly events occurred in Europe – a combination of the worst floods for centuries, severe storms and flash floods, especially October’s Storm Jeanett “one of the most expensive storms ever for the German insurance industry,” which hit almost all of western and central Europe and “will probably cost insurers more than US$ 1.5bn.”

The report noted that “various weather extremes herald new El Niño,” and that “mounting loss potentials call for adjustments of insurance prices and conditions.” It also noted that 2002 was “a year of extremes: Scientists documented record figures for windstorms, rain and floods. In many cases it was only fortunate circumstances that prevented even greater losses.”

The report gave further details as follows:
— In the year 2002 some 11,000 people throughout the world were killed in natural catastrophes; in the previous year the figure was 25,000, owing to the huge earthquake catastrophes in Gujarat (northwest India) and El Salvador.
— The number of natural catastrophes recorded in 2002 was around 700 and thus above the average for the 1990s (650).
— Economic losses soared to some US$ 55bn (2001: US$ 35bn) mainly because of the summer floods in Europe.
— Insured losses reached a figure of US$ 11.5bn (as in the previous year).
— Towards the end of the year there was mounting evidence of a new El Niño event around the Pacific: Australia was hit by serious droughts and the United States by floods on the Pacific coast and heavy snow storms in the Midwest and on the East Coast.
— Although in the case of technological (man-made) catastrophes the year 2002 was marked by numerous air crashes, shipping accidents (in some cases with devastating environmental damage, as on the northwest coast of Spain), major fires, and further terrorist attacks, they were far from reaching the same extent of loss or number of victims as the natural catastrophes.

“Windstorms and floods lead the table with just under 500 of the total of 700 loss events recorded. They accounted for 98% of the insured losses from natural catastrophes and thus dominated the claims burdens in the insurance industry,” said the report. It noted that while the European floods were probably the worst since 1342, tropical cyclones, such as Lili and Isidore that hit the U.S. caused relatively less damage than usual. Further losses were caused by tornadoes, particularly in the U.S., dust storms and earthquakes.

Munich Re also warned that climate changes seem to be increasing the severity of natural weather events, and the consequences for the insurance industry. Dr. Gerhard Berz, head of Munich Re’s Geo Risks Research Dept., stated: “Catastrophe losses are mostly caused by extreme weather events. This was the case in 2002 too. The experience that has been gathered over the years shows that buildings and infrastructure are usually not sufficiently designed to cope with the high strains of extreme weather events. The evidence points to critical extreme wind speeds and precipitation being exceeded with increasing frequency, so that for this reason alone there will inevitably be a stark increase in the loss burdens as well. 2002 was, along with 1998, the warmest year since temperature readings began – and this is evidence of the still unbroken trend of global warming.”

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