According to Munich Re, Comparatively Few Major Natural Catastrophe Losses in First Half-Year; Harsh Winter Impacts U.S.
MUNICH--(BUSINESS WIRE)--The statistics for natural catastrophes for the first half of 2014 have been marked by pleasingly low levels of global claims. Overall economic losses of US$ 42bn and insured losses of US$ 17bn to the end of June were considerably below the average for the past ten years (US$ 95bn and US$ 25bn respectively). Thankfully, the number of deaths caused by natural catastrophes was also comparatively low. However, towards the end of the year the natural climate phenomenon El Niño may impact regions differently in terms of the number and intensity of weather extremes.
“The harsh winter in the Midwest and on the East Coast once again exposed the vulnerability of infrastructure in the U.S. In many cases, there were power outages for long periods, and economists estimate that the cold winter also contributed to negative economic growth in the first quarter”
During the first half of the year, 2,700 people died as a result of natural catastrophes, which was much lower than is normal during the first six months of a year (10-year average: 53,000). There were around 490 loss-relevant natural catastrophes. The highest economic losses arose in the U.S. (35%), followed by Europe and Asia (30% each).
Natural catastrophe statistics from the first half of 2014, as well as analysis from Carl Hedde, Head of Risk Accumulation at Munich Re America, Dr. Peter Hoppe, Head of the Geo Risks Research unit at Munich Re, and Dr. Robert Hartwig, President and Economist of the Insurance Information Institute, are available at: http://www.munichreamerica.com/mram/en/events/Webinar/2014-07-natcatreview/index.html
“Of course, it is good news that natural catastrophes have been relatively mild so far,” said Torsten Jeworrek, Munich Re’s Board member responsible for global reinsurance business. “But we should not forget that there has been no change in the overall risk situation. Loss minimization measures must remain at the forefront of our considerations. They make absolute sense from a macroeconomic perspective, as lower subsequent losses mean that they mostly generate savings of several times the investment amount. And they protect human lives.”
The effect of loss susceptibility on claims was clearly demonstrated by two snowstorms in Japan. These storms in February, which hit Tokyo and central Japan in particular, brought overall losses of around US$ 5bn and insured losses of more than US$ 2.5bn, and were the most costly natural catastrophe worldwide in the first half of the year. Snowfalls of up to a meter are very unusual in the affected provinces in Japan, though they would cause very few problems in other countries. There were numerous accidents, and the roofs of many halls and greenhouses collapsed under the weight of the snow.
The record winter in North America also caused significant losses, with extremely cold temperatures and heavy snowfalls over a longer period in many parts of the U.S. and Canada. The losses from various blizzards totaled around US$ 3.4bn. The most costly snowstorm was in the first week of January: losses for this storm alone totaled US$ 2.5bn, of which US$ 1.7bn was insured. In many instances the harsh winter also had a heavy impact on business, as companies were forced to stop production. At the end of January, a blizzard brought the Atlanta metropolitan area almost to a standstill, even though only a few centimeters of snow had fallen. Snow and ice made the highways impassable, as there was a lack of snow-clearing equipment for a city unused to such conditions.
“The harsh winter in the Midwest and on the East Coast once again exposed the vulnerability of infrastructure in the U.S. In many cases, there were power outages for long periods, and economists estimate that the cold winter also contributed to negative economic growth in the first quarter,” said Tony Kuczinski, CEO and President of Munich Re America, Inc. “Our industry and government must work together to encourage and facilitate greater investment in infrastructure projects that protect communities from loss. Consumers must be informed about the natural catastrophes they are exposed to; what they are or are not insured for; and how to protect their homes and businesses to withstand locally occurring natural hazards.”
According to Peter Höppe, Head of Munich Re’s Geo Risks Research Department, there is a link between the weather extremes in the northern hemisphere this winter. “These extremes – with heavy winter conditions in North America and Asia, and the extraordinarily mild winter across large parts of Europe – were due to significant and lengthy meanders in the jet stream,” said Höppe. “And scientists are still having intense debates about whether such sustained changes to patterns in the jet stream – and therefore also the frequency of such extreme and persistent weather conditions – might increase in the future due to climate change.”
The mild winter in Europe contributed to the heavy floods in England that lasted into February. As it was mainly rural areas that were affected, overall losses remained within an acceptable limit of US$ 1.3bn (€960m) and insured losses were around US$ 1.1bn (€800m).
In May, heavy flooding in the Balkans as far east as Romania caused very high economic losses. It is not unusual to have intense rainfall in these countries in the spring, but the low-pressure system Yvette produced abnormally heavy and persistent rainfall. In many places, precipitation reached the highest levels ever registered since records began more than 100 years ago. High flood levels, particularly on the rivers Sava, Bosna and Danube caused overall economic losses of US$ 4bn (€3bn), making this the second most costly natural catastrophe in the world in the first half of the year. However, the relatively low level of insurance penetration meant that insured losses were not very high.
A storm front that passed over western Germany on 9 June caused high insured losses. There was localized heavy damage caused by wind squalls and hailstones, particularly around Düsseldorf. Overall, insured losses were US$ 890m (€650m), and overall losses amounted to around US$ 1.2bn (€880m). The storm front had previously passed through France and Belgium, causing major damage in the Yvelines département of France. Overall losses in the various countries amounted to US$ 3.1bn (€2.3bn), of which US$ 2.5bn (€1.8bn) was insured.
The tornado season in the U.S., which peaks from May to July, has been below average so far. The U.S. weather agency NOAA recorded 721 tornadoes until end of June, in comparison to an average of 1,026 in the years 2005–2013. However, some tornado outbreaks caused significant damage. Videos filmed on 17 June showed an extremely rare twin tornado in the State of Nebraska. The two tornadoes were both classified at the second-highest scale 4, with wind speeds of over 260 km/h, and they caused serious damage in the small town of Pilger.
In the night of 4 July, the first named storm of this year’s hurricane season, Hurricane Arthur, made landfall on North Carolina’s barrier islands as a category 2 hurricane with wind speeds of reportedly up to 100 mph. Luckily, the storm did not affect the U.S. mainland dramatically. “Hurricane Arthur again made clear how important it is to be prepared for such weather extremes. Arthur showed that nobody should think that risks have vanished only because the recent hurricane seasons were comparatively calm. The risk has not changed, and it remains important to invest in improving the resilience of buildings and infrastructure, in order to reduce losses and the loss of lives caused by such events,” Höppe said.
Over the rest of the year, weather events will probably see increasing impact from ENSO, a naturally occurring phenomenon that involves fluctuating ocean temperatures in the equatorial Pacific. “With the contrary effects of El Niño and La Niña, ENSO can influence weather patterns in many parts of the world,” said Höppe. “It currently looks as though a moderate El Niño will develop by the autumn, with warm water from the South Pacific moving from west to east, thus shifting wind systems and precipitation across the Pacific basin.”
Hurricane activity in the northern Atlantic normally decreases during El Niño phases. The number of typhoons in the northwest Pacific usually increases, but they make landfall more rarely. Tornado activity increases in the USA. “This gives a different distribution of losses across regions. Globally, our loss database NatCatSERVICE records no significant differences in overall losses in moderate El Niño years when compared to neutral years, whereas losses are significantly lower in years with a strong El Niño,” said Höppe. The stronger the El Niño, the more likely it is that there will be a La Niña in the following year, when hurricane activity tends to increase.
Note: Charts, statistics and an infographic on the El Niño phenomenon can be downloaded at http://www.munichreamerica.com/mram/en/events/Webinar/2014-07-natcatreview/index.html
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