Global Natural Catastrophe Insured Losses Reached $52B in 2019: Munich Re

January 8, 2020 by L.S. Howard

Natural catastrophes caused overall losses of $150 billion during 2019, including insured losses of about $52 billion, which matches the average of the past 30 years, according to Munich Re’s catastrophe update.

The reinsurer said the protection gap (the difference between overall economic losses and insured losses) was higher in 2019 than in 2018, due largely to the high share of flood losses, which are often not insured to the same extent as wind damage in most industrial countries.

Nevertheless, Munich Re said, the insured portion of overall losses, which was slightly above 35 percent, matches the average of the past 10 years. The ongoing protection gap is evidence that large sections of the market remain uninsured, especially in emerging and developing countries, the reinsurer continued.

Typhoons in Japan – Hagibis and Faxai – caused the year’s biggest losses in terms of both overall economic losses and insured losses as well as bringing the country’s second consecutive year of record cyclone losses, the report said. Hagibis caused an estimated $17 billion in overall losses, with insured losses of about $10 billion, while Faxai caused overall estimated losses of about $9 billion, with insured losses of about $7 billion due to the greater share of more heavily insured storm losses.

Munich Re said that last year’s typhoon season was again, as in 2018, subject to the “El Niño Modoki” effect, a natural climate oscillation that causes variations in water temperatures in the tropical Pacific Ocean. The reinsurer explained that these conditions cause typhoons steer more frequently towards Japan.

Nevertheless, Munich Re said, the typhoon season in the northwest Pacific was close to the long-term average in terms of the number of storms.

“The typhoon season shows that we must consider short-term natural climate variations as well as long-term trends due to climate change,” said Ernst Rauch, chief climate and geoscientist at Munich Re, in a statement in the report.

“In particular, cyclones are becoming more frequently associated with extreme precipitation, as with Hagibis in Japan in 2019 and Hurricane Harvey in 2017 in the U.S. Recognizing these changes can form the basis for further preventive measures to reduce losses,” he added.

Climate Change

At several points in its report, Munich Re discussed the issue and effects of climate change.

“The severe cyclones in 2019 have highlighted the importance of knowledge about changes in risk,” said Torsten Jeworrek, member of the Board of Management at Munich Re. “Natural climate variations influence weather catastrophes from year to year. Longer-term climate change effects can already be felt and seen.”

As a result, he continued, buildings and infrastructure must be made more resistant in order to reverse the increasing trend in losses. “This will enable insurance to be more effective and support the remaining financial losses,” he affirmed.

Regarding the ongoing devastation caused by bushfires in Australia, the reinsurer said individual events cannot be directly attributed to climate change, although recent studies have shown that in the long term the environmental conditions for bushfires have become more favorable – especially in the south and east of Australia.

Referring to California’s wildfire trends, Munich Re noted, while losses were lower in 2019 than the record losses seen in prior years, there is still a “sharply rising long-term trend for forest area burned and wildfire losses in the U.S.”

A wet winter helped ameliorate summer drought conditions, Munich Re said. “There were still many fires, but they burned a much smaller area than the five-year average,” bringing overall losses of $1.1 billion, of which about $800 million were insured.

Climate change was a factor in the growing losses from hailstorms across the globe, indicated the reinsurer. “Recent scientific studies have shown that we can expect hailstorms to increase in many regions as a consequence of climate change,” said Rauch. “It is also clear in this case: Measures such as better early-warning systems and more resistant building materials are important in order to mitigate against long-term increases in losses.”

Additional findings from Munich Re’s natural catastrophe report include:

Source: Munich Re

*This story appeared previously in our sister publication Insurance Journal.