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Disaster Losses Down From 2012

Windstorm Xaver: Model shows a large area of high winds in the lower atmosphere pushing waters of the North Sea into the coasts around western Europe.

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Courtesy WeatherBELL Analytics.

Natural catastrophes and man-made disasters worldwide reached $44 billion in insured losses in 2013—down from $81 billion in 2012, according to a Sigma preliminary report by Swiss Re.

The study found that total economic losses from disasters in 2013 totaled $130 billion and 25,000 lives were lost. Hurricane Haiyan alone, which hit the Philippines in November with record-breaking winds, claimed more than 7,000 lives. In 2012 total economic losses were $196 billion and 14,000 lives were lost.

Flooding in central and Eastern Europe in June 2013 created overall losses of $18 billion, with insured losses estimated at $4 billion, according to the report.

In the United States, severe spring and autumn weather spawned thunderstorms and deadly tornadoes.

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While this caused devastation of personal and commercial properties and heavy losses to the insurance industry, the 2013 North Atlantic hurricane season proved to be benign, the report found.

Alberta, Canada in June experienced flooding caused by heavy rains. Insured losses were about $2 billion—the highest ever recorded in the country for any disaster.

The most costly insured catastrophe losses in 2013

Date Insured losses
(US $B)
Economic losses
(US $B)
Event Country
1 June 4.1 18.0 Floods Germany, Czech Republic
2 July 3.4 3.8 Hailstorm Andreas Germany, France
3 June 1.9 4.8 Floods Canada
4 May 1.8 3.2 Severe thunderstorms, tornadoes US
5 March 1.6 2.2 Thunderstorms, tornadoes, hail US
6 May 1.4 2.0 Severe thunderstorms, tornadoes, large hail US
7 October 1.4 2.7 Windstorm Christian Germany, Denmark
8 April 1.1 1.6 Snow storm, ice, tornadoes, heavy rains US
9 December 1.0 1.4 Windstorm Xaver UK, Denmark
10 January 1.0 1.5 Floods caused by Cyclone Oswald Australia

Swiss Re Sigma preliminary estimates

Low Insurance Impact Expected from Haiyan

Damage in the Philippines from Typhoon Haiyan is widespread, with new information emerging daily. Insured losses, however, are expected to be low, with the greatest impact on smaller reinsurers, according to insurance industry reports.

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A.M. Best said in a briefing that it expects insured losses to be minimal, as non-life insurance is less than 1% of the country’s gross domestic product.

“Insured losses in the Philippines will be spread across many segments, including per­sonal lines, fire and property, and marine hull. Fire/property and marine hull will be well reinsured through the major global reinsurers and through Lloyd’s, which will also absorb some marine losses on a primary basis. Net losses to primary insurers will be limited, and some commercial losses also may be covered through captives or other forms of self-insurance,” the report said.

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A.M. Best expects Haiyan to be an “earnings event for reinsurers” – more substantial for smaller, regional reinsurers. While it is expected to have minor impact on larger global companies, it is “yet another loss on top of recent catastrophes in Europe.”

In an update, Dr. Robert Hartwig of the Insurance Information Institute said that economic damages will be significant, with Haiyan having a “major negative impact on the Philippine economy.”

He noted two reasons why insured losses from Haiyan are likely to be low:

• The storm did not have a direct impact on Manila, the capital and largest city in the Philippines, well to the north of the track of Typhoon Haiyan.

• The Philippines is a small market for property/casualty insurance, with premiums of just $1.23 billion written in 2012. This amounts to $12.70 per person, compared to $1,223.90 per person in the U.S. “Even compared with the rest of Asia, the penetration of insurance in the Philippines is relatively low,” Hartwig said in the report, adding that per capita premiums in Asia were $91.90 in 2012.

In 2012 the Philippine’s GDP per capital was ranked 124th out of 184 countries by the International Monetary Fund, he said. The Philippine economy has grown steadily, however—at an annual rate of 7.

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5% as of the second-quarter of 2013—and should become better insured in the future.

Philippines Life and Nonlife Insurance Premiums, 2012

 

Direct premiums written

Nonlife premiums *

$1,231

Life premiums

$2,265

Total premiums

$3,496

Percent of total world premiums

0.08%

* Includes accident and health insurance.

Source: Swiss Re, sigma, No. 3/2013.

Supertyphoon Haiyan Devastates Philippines

Supertyphoon Haiyan strikes the Philippines

Supertyphoon Haiyan hit the Philippines on Friday, leaving at least 10,000 residents dead and hundreds of thousands without reliable food, shelter or water. One of the strongest storms ever recorded, Haiyan’s winds surpassed 140 miles per hour, bringing record storm surges. The full extent of the damage remains uncertain, with communication and transportation severely restricted.

The World Bank has called the Philippines one of the most hazard-prone countries in the world. Closed roads and airports restricted aid efforts after Supertyphoon Haiyan, and communication failures posed some of the greatest challenges to both assessing and recovering from damage.

“Under normal circumstances, even in a typhoon, you’d have some local infrastructure up and some businesses with which you can contract,” Praveen Agrawal, the World Food Program’s Philippines representative and country director, told the New York Times. “Being as strong as it was, it was very much like a tsunami. It wiped out everything. It’s like starting from scratch” in terms of delivering the aid, he said.

The United Nations has set aside over $300 million to help with the country’s recovery from Haiyan over the next six months, and three dozen individual nations and international organizations have pledged financial and humanitarian assistance. The United States recalled thousands of sailors from shore leave back to the USS George Washington, a massive aircraft carrier currently docked in Hong Kong, to use its 80 aircraft to help deliver supplies and evacuate victims in the Philippines’ hardest-hit islands.

Yet with the broad scope of damage to critical infrastructure, the process has been slow. In the major city of Tacloban, for example, the traffic control tower at one of the country’s biggest airports was destroyed, forcing all aircraft to land by sight, further slowing distribution of food and water. Officials opened smaller airstrips, focusing on safely reopening transportation routes as the hundreds of thousands of evacuees continue to face extreme water shortage. This shortage further compounds the dangers authorities face in recovery, as health officials grow more concerned about water-borne diseases. Most notably, the lack of clean drinking and bathing water in crowded evacuation centers brings risk of diarrhea, leptospirosis and dengue.

Officials are looking forward while managing the catastrophic fallout. According to the Wall Street Journal:

Finance Secretary Cesar Purisima acknowledged that the destruction wrought by the disaster on an area that contributes 12.5% to gross domestic product could shave off as much as a full percentage point to economic growth next year, when the government targets GDP expansion of at least 6.5%. He is hopeful that the adverse effect on growth will be cushioned, if not offset, by the reconstruction spending.

“From a fiscal standpoint, we do have fiscal space to spend for reconstruction. The estimates are preliminary, but we need to invest significantly on infrastructure,” Mr. Purisima said.

The New York Times reported:

HSBC Global Research said that the typhoon probably destroyed half the sugar cane production areas in Leyte Province, and that all told, 3.5 percent of the nation’s sugar cane output was probably lost. It also warned of inflationary shocks to the Philippine economy in the coming months, as supply chains are disrupted.

But given the general health of the Philippine economy and the fact that the typhoon affected geographic areas and sectors like agriculture that are not major drivers of the nation’s output, HSBC said, “The economic impact will be limited.”

Citi Research estimated that infrastructure damage will probably run into billions of pesos, exceeding $70 million.

In Warsaw on Monday, some delegates at United Nations talks on a global climate treaty suggested that global warming was responsible for making Haiyan such a devastating storm. Naderev Saño, the chief representative of the Philippines at the conference, told the New York Times, “What my country is going through as a result of this extreme climate event is madness; the climate crisis is madness.”

Scientists cannot be certain of the overall impact of climate change on severe weather like hurricanes and typhoons, but have noted that more powerful storms will continue as the climate changes. With winds of at least 140 miles an hour, Typhoon Haiyan is considered one of the strongest storms to make landfall. “As you warm the climate, you basically raise the speed limit on hurricanes,” said M.I.T. atmospheric scientist Kerry A. Emanuel.

The powerful storm surges recorded are also likely part of a new reality in major storms. “When you strip everything else away, we’re seeing a general rise in sea level,” James P. Kossin, atmospheric scientist at the National Climatic Data Center, told the Times. “There’s no question that storm surge is going to be compounded.”