Insurers paid out around $27 billion for natural disaster claims last year with weather causing 94 percent of incidents, underscoring the challenge posed by climate change, data from reinsurer Munich Re showed on Monday.
While the climate phenomenon known as ‘El Niño’ reduced the development of hurricanes in the North Atlantic, storms and floods still inflicted billions of dollars of damage in Europe and North America, the world’s largest reinsurer said in an annualreview.
Munich Re said floods in the UK and Scandinavia from storm “Desmond” early last month may cause about 700 million euros ($764 million) in claims, while later flooding from storm “Eva” in the UK may cause overall damage of more than 1 billion euros. Climate change may have played a role in the floods, it said.
Two tornado outbreaks and flooding also hit the United States hard last month butMunich Re said damage estimates were not yet available.
The insurance industry lobbied governments to take action to curb climate change in the run-up to the UN climate summit in Paris last year, citing both rising payouts in heavily-insured rich country markets and a lack of affordable insurance in developing countries where it is most needed.
“The proportion of insured losses for catastrophes in developing and emerging countries remains very low,” said Munich Re board member Torsten Jeworrek.
“The insurance industry is exploring new avenues to close this gap in cover and thus to help people better cope with material losses after a catastrophe,” Jeworrek said.
Munich Re participates in newly-established insurance pools to help Caribbean, Pacific Island and African states cope with weather related catastrophes.
Insurers and reinsurers may get a push from an international effort unveiled by Bank of England Governor Mark Carney to develop company disclosures so investors can assess companies’ physical, liability and other risks from climate change.
“Quantification and disclosure of insurance risk has helped to drive reinsurance demand for the last 25 years,” said John Cavanagh, Chief Executive at broker Willis Re.
Drop in Claims, Rise in Deaths
The $27 billion in insured damage last year was lower than the $31 billion registered in 2014 and also below the 10-year average of $56 billion, Munich Re said.
Overall damage, including that not covered by insurance, was $90 billion last year, the lowest level since 2009.
In all, 23,000 people were killed in 2015, many in the Nepal earthquake in April. The total compared with 7,700 the previous year, but was well below the 10-year average of 68,000.
Lower claims payouts boost insurance industry profit but have a downside for reinsurers, whose insurance company clients often then demand lower prices for reinsurers’ backing.
Willis Re said reinsurance prices continued to fall for contracts taking effect at the start of 2016 and that predictions of an end to the multi-year decline had proved illusory.
“The January renewals have unfortunately confounded the hopes of commentators that the market was reaching a pricing floor,” Willis Re’s Cavanagh said.
The review gave no claims figures for Munich Re itself. The reinsurer is due to report its results from the January renewals contracts with insurers, as well as its 2015 financial results, on Feb. 4. ($1 = 0.9159 euros)
(Additional reporting by Christoph Steitz.)