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Global Economy Faced $123bn Natural Hazard Impact In Warmest Year On Record

The Annual Global Climate and Catastrophe Report by Impact Forecasting, which evaluates the impact of the natural disaster events that took place worldwide during 2015, is out today. 

The report reveals that 300 separate global natural disasters occurred in 2015, compared to the 15-year average of 269 events, causing a combined total insured loss of USD35 billion – 31 percent below the 15-year average of USD51 billion, and the lowest annual insured loss total since 2009. The costliest event for insurers was a February winter storm that impacted much of the Eastern United States and resulted in public and private insurance payouts of more than USD2.1 billion.

Global economic losses from natural catastrophes in 2015 stood at USD123 billion – 30 percent below the 15-year average of USD175 billion. There were 14 multi-billion dollar economic loss events around the world, with the costliest being forest fires that burned out of control in Indonesia. At USD16.1 billion, The World Bank noted that the economic loss from the fires represented 1.9 percent of the country's GDP.

Meanwhile, 2015 replaced 2014 as the warmest year since the recording of global land and ocean temperature began in 1880.

Stephen Mildenhall, Chairman of Aon Analytics, said: "Global insured property catastrophes in 2015 accounted for just 28 percent of economic losses, in-line with the 10-year average of 29 percent. In many regions, economic catastrophe losses are very material relative to national GDP and yet are insured at much lower levels than inthe United States and Europe. Of our top five economic losses, four occurred outside the United States and yet none of these was a top 10 insured loss owing to low insurance penetration in the affected countries. With its abundant capital and sophisticated risk management tools, the industry should drive its own growth by better delivering on its core mission of providing critical risk transfer products to enable stable economic development in all regions of the world."

The study reveals that the three costliest perils – flood, severe thunderstorm, and wildfire – accounted for 59 percent of all economic losses during the 12 months under review. The deadliest event of 2015 was the magnitude-7.8 earthquake and subsequent aftershock that struck Nepal in April and May, killing more than 9,100 people and costing the nation and surrounding countries an estimated USD8.0 billion in damage and reconstruction.

Steve Bowen, Associate Director and Meteorologist at Impact Forecasting, said: "While a notable uptick in recorded natural disaster events did not directly translate to greater financial losses in 2015, the year was marked by 31 individual billion-dollar disasters, or 20 percent more than the long-term average. For just the fourth time since 1980, there were more than 30 such events in a year. Asia once again incurred the greatest overall economic losses, representing 50 percent of the world total and four of the five costliest events. Despite 32 percent of global economic losses occurring in the United States, it accounted for 60 percent of the insured loss and seven of the top 10 costliest insured events. The strongest El Niño in decades had definitive impacts on global weather patterns during the second half of 2015 that led to costly flood, tropical cyclone and drought events. These impacts will linger into the first half of 2016, and ironically enough, we could be discussing impacts from La Niña at this time next year."

By the end of 2015, the United States had extended its record to 10 consecutive years without a major hurricane landfall. While 32 percent of catastrophe losses occurred inside of the United States, the country accounted for 60 percent of global insured losses, highlighting the high level of insurance penetration.

The top 10 insured loss events in 2015 comprised of five United States severe thunderstorm outbreaks, one United States winter storm, one European windstorm, one Indonesian forest fire, and one United States drought. No region of the world sustained aggregate insured losses above its 15-year average in 2015; though EMEA, Asia Pacific and the Americas (non-US) were all above their respective medians.

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Significant Storm Events In The U.S. And U.K. Contribute To $4bn December Insurance Bill

Aon Benfield's catastrophe model development team launches the latest edition of its monthly Global Catastrophe Recap report, which evaluates the impact of the natural disaster events that occurred worldwide during December 2015

The study will be shortly followed by Impact Forecasting's Annual Global Climate and Catastrophe report – scheduled to be launched on January 13 – which will offer a comprehensive analysis of the natural disaster events of 2015, and whose preliminary data reveal that despite a higher than normal number of disasters, overall losses were below normal on both an economic and insured loss basis. The United States accounted for 60 percent of all global insured losses in 2015.

The December catastrophe report reveals that a complex weather pattern impacted multiple regions of the United States, killing at least 64 people. Parts of the Midwest, Plains, Southeast, Rockies and Northeast were all impacted by the inclement weather, though the states of Missouri, Texas, Illinois, Arkansas, Oklahoma, Mississippi, Tennessee, Alabama,Kentucky and Indiana were among the hardest-hit.

Preliminary estimates suggest that total economic losses from the weather events during the month will exceed USD4.0 billion, with insured losses likely to approach or exceed USD2.0 billion. The Insurance Council of Texas reported losses of USD1.2 billion in the Dallasmetropolitan area alone.

The severe weather pattern resulted in at least 58 tornado touch-downs, historic flooding in the Mississippi Valley and Midwest, and record snowfall and ice that led to extensive travel disruption, as well as hail and damaging winds.

Meanwhile, rainfall from a series of North Atlantic storm systems led to extensive flooding across the United Kingdom and Ireland throughout the month. The arrival of windstorms Ted and Eckard – also known locally as Desmond and Frank – brought even more flood and wind damage. The hardest-hit areas included a large swath of southern Scotland, northernEngland, and Wales, where thousands of homes endured varying levels of flood inundation.

Various published reports, including from the Association of British Insurers, indicated that preliminary insured losses in the UK were expected to exceed GBP1.5 billion (USD2.2 billion), while overall economic losses were forecast to be around GBP2.8 billion (USD4.0 billion).

Further natural hazard events to have occurred during December include:

  • Areas of Argentina, Paraguay, Uruguay and Brazil endured their worst flooding in at least 50 years, which killed at least 16 people and resulted in preliminary economic loss estimates in excess of USD200 million.
  • Typhoon Melor made multiple landfalls in the Philippines, killing at least 42 people and injuring 24 others. The Philippines' National Disaster Risk Reduction and Management Center reported economic damages to agriculture and infrastructure alone at PHP6.5 billion (USD140 million).
  • A wildfire in the Australian state of Victoria destroyed at least 116 homes. The Insurance Council of Australia declared an insurance catastrophe, with preliminary insured losses listed at AUD53 million (USD38 million), and total economic losses expected to exceed USD100 million.
  • The Ethiopian National Risk Management Coordination Commission announced that it sought USD1.4 billion to deal with its worst drought in 30 years. At least 10 million people were affected.

To view the full Impact Forecasting December 2015 Global Catastrophe Recap report, please follow the link: http://bit.ly/1TD6oaJ  

Along with the report, users can access current and historical natural catastrophe data and event analysis on Impact Forecasting's Catastrophe Insight website, which is updated bi-monthly as new data become available: www.aonbenfield.com/catastropheinsight

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Insurance Companies And Products As We Know Them Today Will Have To Evolve

That's according to Griselle Chernys, CEO, at Wellaway, who took an executive seat on a recent iPMI Magazine round table business forum.

Although global risks have changed dramatically, medical inflation and the cost of employee benefits continues to cause concern. In the most recent iPMI Magazine Round Table Business Forum we spoke with leading C-Level executives from the world of International Private Medical Insurance about the rising cost of healthcare and medical inflation.

An AON report report shows that in 2015, medical costs are expected to increase by 10.15 percent before plan design changes and vendor negotiations—6 percentage points higher than the average inflation rate. In 2014, the global average medical trend was 10.34 percent. While the global average medical trend is expected to decline, three regions--Asia Pacific, Europe and Latin America--are projected to see an uptick in rates for 2015.

Talking to the IPMI round table group about the Aon Hewitt report Griselle Chernys, CEO, at Wellaway told us, “I think that the data is pertinent and probably correct. Healthcare is a commodity that providers will control and deliver as they want, especially in the private sector with IPMI coverage. Hospitals and physicians have the upper hand in the delivery and pricing, thus the need for integrated services. As I heard a physician administrator in a hospital say once, during some insurance pricing negotiation, “this is our price and if you do not like it, I would like to see you admit and deliver the medical care the member needs." As long as the relationship of providers and insurance is antagonistic, a solution will not be able to achieved. More and more hospitals and physicians will develop and deliver health plans via their medical facilities and I predict that the multi-hospital system will develop internationally as it has happened in the USA or as we see with Hospiten and the like.

Insurance companies and products as we know them today will have to evolve.”

ANDREW APPS, HEAD OF GLOBAL HEALTHCARE, BELLWOOD PRESTBURY added, “Competition between iPMI insurers is intensifying and will continue to do so as new entrants dip their toe into the market and dream of taking a slice of the ever expanding market. Price cutting particularly amongst the employer-sponsored plans is inevitable as the larger players jockey for position and greater market share, all of which is good for the employer in the short term at least. As the saying goes, there is always someone out there who will take the risk. But there has to come a point where underwriters have to make a return on their investment. At this point premiums have to rise and with the relationship between insurers and medical service providers becoming all the more strained as medical treatment fees increase, that day is not too far away. This makes the job of the adviser /broker all the more important."

ROMAN BEILHACK, CEO, GLOBALITY HEALTH said,Employers are operating in an environment where they need to provide high levels of healthcare for their employees, sometimes due to statutory requirements and other times due to the natural tendency of employers to look after the well being of their workforce. Employers are typically under pressure to keep their operating costs low and when they review their budgets during their annual business planning cycles they will aim to minimise the cost of employee benefits. Due to these cost pressures, there may be situations where employers will downgrade the insurance coverage so that they can afford a plan rather than removing the plan altogether. Globality seeks to find solutions for their clients in these situations.

The global average inflation rate is interesting for comparing one year to the next. However, when it comes to employer-sponsored plans then the specific features of those plans should be considered. This means considering the locations of the insured members, the benefit levels, the treatment providers and network access. Referring to a single global average can be misleading for many employers.”

One of the most common questions we hear within the IPMI industry is: how will the cost of international private medical insurance rise in the next 5 years?

ROMAN BEILHACK, CEO, GLOBALITY HEALTH told us, “Costs are expected to continue to rise at levels above general price inflation. There are continual advances in medical science with new treatments and medicines being developed all the time. It is normal that insured members will demand the best treatments and services available, particularly for expatriates. In order for insurers to offer these new treatments then there will inevitably be premium increases.

However, insurers should not use this as an excuse to increase premiums beyond what is necessary. As can be seen recently, Globality is holding 2016 rates at 2015 levels for many categories of its business."

ARJAN TOOR, MANAGING DIRECTOR, CIGNA GLOBAL IPMI added, “Medical inflation is driven by unit cost, i.e. the price of each service; and utilization, that is how many and what type of services are used. As the world’s health care standards continue to rise and the range of treatment facilities and breadth of treatment options available continues to increase, it is without doubt that both unit cost and utilisation will also continue to increase.

It’s our job as the insurer to understand these risks and continually evolve our proposition to protect our customers from the impacts of medical inflation as far as possible. We’re continually working on initiatives to help minimize the impact of inflationary volatilities including investments in expanding our medical network and claims teams globally, meaning we can counteract medical inflation spikes to a certain extent as we build long-term relationships with hospital groups. It’s a lot about experience as well - it’s imperative that our claims advisors know the expected cost of a hip operation in Singapore, for example, and can ask the right questions to ensure the costs are appropriate.

Ultimately, it’s impossible to say exactly how premium costs will rise over a 5 year period, but our focus will continue to be on driving forward our mission of helping the people we serve improve their health, well-being and sense of security.”

ANDREW APPS, HEAD OF GLOBAL HEALTHCARE, BELLWOOD PRESTBURY commented, “If I had a crystal ball, it would be easy to answer this; however, the reality is that no one really knows to what extent iPMI premiums are going to rise over the next few years. What is certain is that premiums will continue to increase due to the rising cost of medical treatment along with the ever popular demand for private medical treatment.

That said, increased competition amongst the iPMI providers has, to some degree, helped to keep premiums palatable for most policyholders (putting to one side the notion that nobody likes to see their premiums increase), with average year on year increases running between 5-10% depending upon where a person is living and working. How long this will continue is anyone’s guess, but the market is hotting up with yet more new provider entrants trying their hand.”

GRISELLE CHERNYS, CEO, WELLAWAY added, “The cost of international private medical insurance will rise dramatically and this will be driven by the development and demand for new treatments, pharmaceuticals and technology. Longevity is also playing a role in the inflation and utilization of medical services which creates more demand and demand will drive costs.”

TO READ THE COMPLETE ROUND TABLE, THE RISING COST OF GLOBAL HEALTHCARE, CLICK HERE.

 

 

 

 

 

 

 

 

 

 

 

 

 

 

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Global Catastrophe Losses In October Expected To Top USD10BN

Aon Benfield's catastrophe model development team, today launches the latest edition of its monthly Global Catastrophe Recap report, which evaluates the impact of the natural disaster events that occurred worldwide during October 2015. Aon Benfield is the global reinsurance intermediary and capital advisor of Aon plc (NYSE:AON).

The report reveals that the expected USD2.0 billion minimum economic cost of the South Carolina & eastern U.S. floods will place the event as one of the top 10 costliest non-tropical cyclone flood events in the country since 1980. Public and private insurers have already reported more than USD400 million in payouts.

Meanwhile, Hurricane Patricia became the strongest tropical cyclone ever recorded in the Western Hemisphere when its maximum sustained wind speeds reached 200 mph (325 kph) and made landfall in Mexico. Preliminary economic damage was estimated at USD300 million but, given low insurance penetration in the hardest-hit areas, insured losses were expected to be negligible.

This cyclone contributed to a record 22 global tropical cyclones in the Northern Hemisphere that have reached Category 4 or 5 intensity in 2015, breaking the previous record of 18 set in 2004. Most of these storms in 2015 have been in the Pacific Ocean, which is to be expected given the very warm sea surface temperatures that have been enhanced by El Nino's intensity.

Steve Bowen, Impact Forecasting associate director and meteorologist, said, "October ended as one of the most active, and costly, months of 2015 for natural disasters. Many of the major weather events – such as record-breaking tropical cyclone activity in the Pacific Ocean, the historic South Carolina floods, and deepening global droughts – were clearly impacted by the current El Nino's growing fingerprint on global weather patterns. Given the increasing intensity of El Nino, it is expected that these impacts will become even more defined around the world as we enter the boreal late autumn and winter months."

Elsewhere in October:

  • A major magnitude-7.5 earthquake struck northern Afghanistan on October 26, shaking a large swath of the country as well as portions of Tajikistan, Pakistan and India with at least 403 people confirmed dead
  • Typhoon Mujigae became the costliest tropical cyclone of 2015 after making separate landfalls in China and the Philippines
  • Super Typhoon Koppu made landfall in the Philippines as a strong category 4 typhoon, killing at least 58 people and injuring 83 others
  • Major Hurricane Joaquin lashed the Bahamas before tracking past Bermuda
  • Severe thunderstorms in the French Riviera impacted areas from Monaco to Frejus, prompting massive flash flooding
  • Drought conditions worsened in Papua New Guinea as El Niño impacts intensified globally
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Preliminary Sigma Estimates For First-Half 2015: Global Catastrophes Cause Economic Losses Of USD 37 Billion; Number Of Victims Rises

According to preliminary sigma estimates, total economic losses from natural catastrophes and man-made disasters reached USD 37 billion in the first half of 2015. The global insurance industry covered nearly 45% (USD 16.5 billion) of these losses, which is higher than the previous 10-year average cover of 27%. Around 18 000 people lost their lives in disaster events in H1 2015, up from more than 4 800 in the first half of last year. The earthquakes in Nepal, and a heatwave in India and Pakistan, claimed the highest number of victims.

Natural catastrophes caused total economic losses of USD 33 billion in the first half of the year, well below the USD 54 billion in H1 2014 and also the average first-half year loss over the previous 10 years (USD 99 billion). Of the overall insured losses, USD 12.9 billion came from natural disasters, down from nearly USD 20 billion in H1 2014 and again below the average first-half year loss of the previous 10 years (USD 25 billion). The costliest natural catastrophes for the insurance industry resulted from severe winter weather and thunderstorms in the US and Europe. In February, a winter storm in the northeastern US caused insurance losses of USD 1.8 billion, the highest loss of any event so far this year. Man-made disasters, meanwhile, triggered an additional USD 3.6 billion in overall insurance losses in H1 2015.

Earthquakes and soaring temperatures claim thousands of lives
Disaster events claimed many lives in the first six months of 2015. In all, around 18 000 people lost their lives. There were more than 9 000 fatalities in the earthquakes that struck Nepal in close succession in April and May, the largest loss of life due to any natural catastrophes so far this year. The quakes also left many people homeless. The economic losses in Nepal are estimated to be more than USD 5 billion. Of those, only around USD 160 million were insured losses.[1]

"The tragic events in Nepal are a reminder of the utility of insurance," says Kurt Karl, Chief Economist at Swiss Re. "Insurance cover does not lessen the emotional trauma that natural catastrophes inflict, but it can help people better manage the financial fallout from disasters so they can start to rebuild their lives".

In the same region, India and Pakistan were hit by a severe heat wave in May and June. Temperatures soared to 48°C, the highest recorded since 1995. It is estimated that more than 2 500 people died in India and 1 500 in Pakistan as a result of the extreme heat.

Another factor in the high number of victims of disaster events in the first half of this year is the number of migrants who have died attempting to reach Europe from conflict zones in northern Africa, often in unseaworthy vessels. In search of a better life, sadly these people have instead lost their lives as the boats capsized while carrying them across the Mediterranean.

[1] The insured loss estimate for the Nepal earthquakes is subject to change.

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Typhoon Chan-hom Causes USD1.5bn Economic Loss In China

Aon Benfield's catastrophe model development team have launched the latest edition of its monthly Global Catastrophe Recap report, which evaluates the impact of the natural disaster events that occurred worldwide during July 2015.

The report reveals that Typhoon Chan-hom tracked across much of the Western Pacific Ocean during the month, causing extensive damage in China, Japan's Okinawa Island chain, South Korea, Taiwan and Guam, killing at least six people and injuring 30 others.

Total economic losses were estimated at more than USD1.6 billion, with China bearing the greatest impact; according to China's Ministry of Civil Affairs, damage from Chan-hom had resulted in a CNY9.1 billion (USD1.5 billion) economic loss, mainly as a result of damage to agricultural interests and infrastructure.

Additional landfalling tropical cyclones in Asia during the month included Typhoon Linfa and Super Typhoon Nangka, which caused total economic losses of USD214 million and USD200 millionrespectively.

Adityam Krovvidi, Head of Impact Forecasting Asia-Pacific, said, "The recent tropical cyclone losses inAsia show that the peril remains an increasingly costly one for the continent on both an economic and insured loss basis. With the peak of the Western Pacific typhoon season approaching, we can expect further chances of landfalls in the basin. Impact Forecasting has developed an Asian typhoon model and a Japan typhoon model to help our clients evaluate their risks for when the next event strikes."

Elsewhere during the month, two separate stretches of severe thunderstorms impacted the United States, with the majority of damage occurring in the Midwest, Plains, Southeast and the Northeast as a result of tornadoes, large hail, and damaging straight-line winds. Initial insured loss estimates reachedUSD325 million.

Meanwhile, Cyclone Raquel brought torrential rainfall to portions of the Solomon Islands as more than 150 buildings were damaged or destroyed and almost 40,000 food gardens sustained damage.

Also occurring during July:

  • Seasonal monsoon rains brought considerable flooding and landslides across a wide area of southern Asia, killing more than 250 people and injuring hundreds of others. Some of the most significant damage was registered in parts of China, Pakistan, India, Nepal, Vietnam,Myanmar, Bangladesh, and Afghanistan. Total aggregated economic losses were estimated at more than USD2.0 billion, with the majority of losses sustained in China.
  • Floods impacted Costa Rica's Caribbean coast. An estimated 322 communities were affected by the floods and landslides as 3,308 homes were inundated.
  • Severe thunderstorms impacted Western Europe, killing at least three people. Widespread damage was reported in multiple countries primarily due to large hail and fallen trees. The Dutch Association of Insurers noted that losses were expected to minimally reach EUR13 million (USD14 million), with the figure expected to rise.
  • Severe drought conditions persisted across at least 10 Chinese provinces, resulting in total economic losses estimated at CNY11.8 billion (USD1.8 billion).
  • Wildfires caused minor structural damage in Canada and the United States.
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Preliminary Economic Impact Of Nepal Earthquake May Reach $5bn

Impact Forecasting, Aon Benfield's catastrophe model development team, launches the latest edition of its monthly Global Catastrophe Recap report, which evaluates the impact of the natural disaster events that occurred worldwide during April 2015. Aon Benfield is the global reinsurance intermediary and capital advisor of Aon plc (NYSE:AON).

The report reveals that a magnitude-7.8 earthquake struck Nepal during the month, killing as many as 10,000 people and causing catastrophic damage throughout Nepal, India, China, and Bangladesh. Preliminary economic losses were expected to reach and possibly exceed USD5.0 billion – which would equal to at least 25 percent ofNepal's gross domestic product (GDP) – with very low insurance penetration in the region. Government figures revealed that more than 700,000 homes and other structures were damaged or destroyed by the earthquake, as well as dozens of historical sites.

Adityam Krovvidi, Head of Impact Forecasting Asia Pacific, said: "While the level of damage and casualties was enormous, the seismological magnitude of the event in the Indo Nepal region was not unexpected. Scientists have been warning about a major event resulting from the 'central seismic gap' in the Himalayan fault system since the 1934 event. Unfortunately for the earthquake peril, timing is always the greatest unknown factor. The vulnerability of buildings and structures in Nepal poised a significant risk given the absence of good seismic code history and implementation practice. Impact Forecasting has already developed an earthquake scenario model forNepal, which it released at its Singapore conference this week, and is planning to send a team of seismic and vulnerability experts to conduct a reconnaissance study. Our findings will be published in the coming months."

United States severe thunderstorm activity increased significantly in April, with five separate events impacting central and eastern areas of the country. Dozens of tornadoes touched down, with parts of the Plains, Midwest, Southeast, Mid-Atlantic and Southeast sustaining the worst damage. Total combined insured losses were expected to reach USD2.0 billion, including more than USD750 million from one event alone. Despite an active month for U.S. tornadoes (185), the annual total remained at a historically low level.

Also occurring in April:

  • Severe weather in Australia caused significant damage in the states of New South Wales and Queensland. The Insurance Council of Australia estimated insured losses would near USD350 million.
  • In China, four severe weather episodes caused widespread damage to properties and crops leading to aggregate economic losses of almost USD1.0 billion.
  • A rare F2 tornado prompted considerable damage in the Brazilian town of Xanxere, killing two people.
  • Chile's Calbuco volcano erupted three times and led to the evacuation of at least 6,500 residents. The eruptions were expected to cost the local economy up to USD600 million.
  • Torrential rainfall caused widespread flooding and landslides throughout parts of Brazil, Afghanistan, Haiti, Kazakhstan, and Kenya. In total, more than 100 people were killed.
  • Major wildfires engulfed parts of Russia's southern Siberia, killing at least 33 people and destroying nearly 1,500 homes. Total economic damages were listed at USD140 million.
  • A stretch of wintry weather caused heavy crop damage in eastern China. Unseasonably cold temperatures left vast areas of crops destroyed, with total damages recorded at USD174 million.

To view the full Impact Forecasting April 2015 Global Catastrophe Recap report, please follow the link:

http://bit.ly/1DSVovC

Along with the report, users can access current and historical natural catastrophe data and event analysis on Impact Forecasting's Catastrophe Insight website, which is updated bi-monthly as new data become available:

www.aonbenfield.com/catastropheinsight

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March Windstorms Cause Billion-Dollar Damage Across Europe

Windstorm Niklas recorded as costliest non-U.S. event in first quarter 2015

Impact Forecasting, Aon Benfield's catastrophe model development team, have launched the latest edition of its monthly Global Catastrophe Recap report, which evaluates the impact of the natural disaster events that occurred worldwide during March 2015. Aon Benfield is the global reinsurance intermediary and capital advisor of Aon plc (NYSE:AON).

The report reveals that Windstorms Mike and Niklas swept through western and central Europe at the end of March, killing at least nine people and causing widespread damage. Hurricane-force winds were noted in parts of Germany, the UK, Netherlands, Switzerland, Austria, and Poland, with Germany sustaining the most significant damage. Based on preliminary damage reports from each country and local insurers, it is expected that total economic and insured losses are each likely to exceed USD1.0 billion.

Adam Podlaha, Head of Impact Forecasting, said: "The costly losses endured from windstorms Niklas and Mike further highlight the importance of using catastrophe models to forecast the peril in Europe. Impact Forecasting successfully released an event footprint within 48 hours of Niklas' passage – expected to be the costliest non-U.S. event of Q1 2015 – which allowed our clients to quickly determine loss estimates while running the analysis using our ELEMENTS platform. As we move towards the historically costliest quarters of the year for the insurance industry in Q2 and Q3, clients will have the chance to learn more about Impact Forecasting's modeling and software capabilities at one of our five upcoming global conferences."

Elsewhere during the month, Cyclone Pam struck the South Pacific archipelago of Vanuatu, killing at least 11 people and injuring several others. On multiple islands, including an island including the capital city of Port Vila, 90 percent of homes and structures were damaged or destroyed as Vanuatu received a preliminary insurance payout of USD1.9 million from the Pacific Catastrophe Risk Insurance Pilot program. Pam was recorded as the strongest cyclone to make landfall globally since Typhoon Haiyan struck the Philippines in 2013.

Meanwhile, Cyclones Nathan and Olwyn made multiple landfalls in Australia, causing damage to the agricultural sector, while Super Typhoon Maysak tracked across Micronesia and killed at least nine people. After one of the quietest starts to the United States severe weather season in recent history, convective activity had increased by the end of March as two separate multi-day events caused widespread hail, straight-line wind, and tornado damage across parts of the Plains, Midwest and Southeast. Combined total economic and insured losses were anticipated to reach into the hundreds of millions (USD).

Severe winter weather again impacted the United States across regions of the Southwest, Rockies, Plains, South, Midwest, Mid-Atlantic, and Northeast, killing 13 people and causing widespread damage. Total economic losses were estimated at USD175 million, while insurers reported losses in excess of USD110 million.

In China, hail damage, predominantly to agricultural lands and construction facilities in northwestern and southern sections of the country, resulted in forecast economic losses of CNY1.7 billion (USD275 million).

A historic flash flood event swept across northern Chile's Atacama and Antofagasta regions, killing at least 25 people and damaging or destroying as many as 14,000 homes.

Multiple moderate earthquakes struck China during the month, killing two people and damaging a combined 33,000 homes. Total economic losses were listed at roughly USD40 million.

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Insured Losses From Disasters Below Average In 2014 Despite Record Number Of Natural Catastrophe Events

According to the latest sigma study, global insured losses from natural catastrophes and man-made disasters were USD 35 billion in 2014, down from USD 44 billion in 2013 and well below the USD 64 billion-average of the previous 10 years. There were 189 natural catastrophe events in 2014, the highest ever onsigma records, causing global economic losses of USD 110 billion. Around 12 700 people lost their lives in all disaster events, down from as many as 27 000 in 2013, making it one of the lowest numbers ever recorded in a single year.

Total economic losses from all disaster events in 2014 were USD 110 billion, down from USD 138 billion in 2013, and well below the previous 10-year annual average of USD 200 billion. Of these total economic losses, USD 101 billion were due to natural catastrophes, with cyclones in Asia Pacific causing the most damage. Of the USD 35 billion in global insured losses last year, USD 28 billion were attributed to natural catastrophe events.

Weather events in the US, Europe and Japan cause most insured losses

"The frequency of catastrophic events appear to be increasing, with a record number of natural catastrophes last year," says Kurt Karl, Swiss Re's Chief Economist. For example, a series of severe thunderstorms triggered sizable losses in both the US and Europe last year. In May, a spate of severe storms with hail in the US resulted in the largest insured loss event of the year, with insurance claims of USD 2.9 billion.

In Europe in the following month, the low pressure system Ela brought large and damaging hail to parts of France and Belgium, and strong winds in Germany. The combined insured losses were USD 2.2 billion, making Ela the second most expensive hail event in Europe on sigma records.

Harsh winters in the US and in Japan were another major cause of insurance claims in 2014. The US experienced multiple storms with heavy snow and long stretches of freezing temperatures. Insured losses from all winter storms in the US were USD 2.4 billion, more than double the average of the previous 10 years. The largest loss event was a storm in January that impacted 17 states, with snow falling as far south as Florida, leading to overall insured losses of USD 1.7 billion. Meanwhile in Japan, a severe cold snap in mid-February brought the heaviest snow in decades, killing 26 people and injuring many more, primarily in road accidents. The insured loss total was estimated at USD 2.5 billion.

It was another quiet hurricane season in the North Atlantic in 2014, with no major hurricane making US landfall for the ninth year in succession. This was the main reason for the overall below-average insured losses last year. In contrast, there were 20 named storms in the eastern Pacific, the most since 1992. Of those, in September  Hurricane Odile in the Baja of California, Mexico, caused the biggest event loss. The region is a tourist destination with many hotels and commercial properties and consequently, insurance penetration is relatively high. The insured losses were USD 1.7 billion, making Odile the second  largest insured loss event ever in Mexico, after Hurricane Wilma in 2005 which caused insured losses of USD 2.1 billion.

Protection gap issues remain
Lack of insurance cover, however, remains an issue in many countries. For example, in May, low pressure system Yvette brought very heavy rain to Serbia, Bosnia and Croatia, in some areas the heaviest downpour in 120 years. Several dams failed and the ensuing floods and debris flows destroyed houses, infrastructure and crops. There were 82 deaths, the largest loss of life from a natural catastrophe event in Europe in 2014, and total losses were estimated to be USD 3 billion, mostly uninsured. Italy also endured a very wet year, with a series of flash floods events causing overall economic losses of more than USD 1 billion, also largely uninsured.

There are areas which are underinsured in the US also. In August last year, the South Napa earthquake caused structural and inventory damage totaling USD 0.7 billion, particularly in the numerous barrel storage facilities of the local wine industry. However, the insured loss was just USD 0.16 billion. "In spite of high exposure to seismic risk, insurance take-up in San Francisco County and California state generally is still very low, even for commercial properties. That's why insured losses, in certain areas, can be surprisingly low when disaster events happen," says Lucia Bevere, co-author of the study.

Severe thunderstorms generate mounting losses
This sigma includes a special chapter on severe thunderstorms, which are also called severe convective storms.1 The total costs and insured losses of severe convective storms have been on an upward trend over the last 25 years. This is mainly due to rising losses in the US where the frequency of storms (particularly tornadoes) and insurance penetration are highest, and in Europe where hail storms and flash flooding happen often.

The global insured losses from severe convective storms rose by an average annual rate of 9% in the period 1990 and 2014.2 Insured losses from all-weather events in the same period rose by 6.6% on the same basis. In the US alone, insured losses from severe convective storms averaged USD 8 billion annually between 1990 and 2014. And from 2008, those losses have exceeded USD 10 billion every year, including in 2014 when insured losses were USD 13 billion, the fourth highest on sigma records.

 [1] Severe convective storms include tornadoes, hail, thunder, heavy rains and flash floods. Generally speaking, a storm is classified as “severe” based on the threshold where damage is expected to occur, typically winds of 90 km/26 miles per hour and/or hail of  2 cm in diametre or more in countries using the metric system and 1 inch or more in US reference terminology,

[2] To smooth out the short term-fluctuations and highlight the longer-term trends, the annual growth rate is calculated based on the average of the years 1986-1990 and 2010-2014.

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Natural Disasters In 2013 - Behind The Figures

Widespread natural disasters in 2013 reminded insurers of the potential for high aggregate losses across their portfolios – but also highlighted the continuing problem of underinsurance in high growth economies.

Insured global losses from natural catastrophes in 2013 totalled around $38bn, according to figures from Swiss Re. Although the cost to insurers was well down on 2012’s $75bn, the catalogue of events contained some important lessons for them. In the US, the hurricane season was a non-event, but tornadoes hit the headlines twice over.

In May, a massive tornado tore through the Oklahoma city of Moore, leaving 24 people dead. Cat modellers estimated that the storm may have caused insured losses as high as $3.5bn, making it the single most expensive tornado in history. Then in mid-November, a rare late season outbreak produced 74 tornadoes.

The state of Illinois was hit hardest, with numerous fatalities in Washington city and Peoria. Heavy winds knocked out power to thousands of homes across Wisconsin, Ohio, Kentucky, Missouri, and Michigan. The most recent assessments put the economic damage at around $1bn and insured losses at hundreds of millions of dollars.

In Europe, heavy and relentless rainfall in May and June resulted in the worst flooding to hit parts of central Europe in years. Eastern and southern Germany, Austria, and the Czech Republic suffered most, but Switzerland, Hungary, Slovakia, and Poland were also affected. Insured flood losses in Germany were estimated at over EUR1.5bn.

In Passau, floodwaters hit their highest level since 1501; the Saale River in Halle, reached its highest level in 400 years of record keeping. Loss adjustors in Europe had little breathing space. After the rain came hail. Insured losses from three severe hail storms across Germany and into France between June and August could eventually reach EUR2.5bn.

If that wasn’t enough, the winter storm season arrived early, and with a vengeance. Windstorm Christian battered Denmark, Germany, the Netherlands, France, UK, and Sweden in late October (AIR estimated insured losses of between EUR1.5bn and EUR2.3bn). In December, Extratropical Cyclone Xaver affected large parts of northern Europe, packing hurricane force winds and the highest storm surge in 60 years.

The wide spread insured losses in 2013 demonstrated to insurers the importance of modelling every single territory and peril.

Milan Simic, managing director of AIR Worldwide, says insurers and reinsurers must make every effort to understand their entire risk profile, including the hard to model perils. If 2011 was the year that the industry woke up to the potential for huge insured losses from non-US, non-Euro cat regions (namely New Zealand, Thailand and Japan), Simic says, 2013 extended that principle. “It demonstrated just how active the whole world is in terms of catastrophes,” Simic told Lloyds.com. “It emphasised to insurers the importance of managing aggregates: a small [insurance] line on many events can potentially produce a big aggregate loss.”

Underinsurance gap

The bald facts from the many tragic events of last year also emphasise the problem of underinsurance, an issue explored in the Lloyd’s Global Underinsurance Report. Lloyd’s research showed that some of the countries at greatest risk from natural catastrophes are the least insured against the potential damages resulting from them. Overall economic losses from 2013’s catastrophic events reached $130bn, more than three times the insured loss. The total loss of life climbed to around 25,000 from 14 000 in 2012. In the Philippines, Typhoon Haiyan, the most powerful tropical cyclone in modern record-keeping, caused the highest loss of life, according to a Swiss Re sigma report. More than 7,000 people were killed and nearly a million were displaced. The risk modelling consultant AIR Worldwide estimated that total damage to residential, commercial, and agricultural properties will range between $6.5bn and $14.5bn.

However, because insurance penetration in the region is relatively low, insured losses are expected to range between just $300m and $700m, AIR predicts. The numbers are another reminder that insurance penetration continues to be an issue, especially in high growth economies, according to Steve Bowen, senior scientist with Aon Benfield’s Impact Forecasting. “While nearly 80% of the economic losses in 2013 were sustained outside of the US, nearly half of all insured losses occurred in the US,” Bowen told lloyds.com. “This speaks to the continued dearth of insurance penetration across parts of Asia, Africa, and Latin America, which are prone to significant natural disasters.”

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