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Munich Re America: Big U.S. Winter Storms - Comparably Lower Insured Loss Estimates; Record Heat and Drought Continue in the West

The cold, snowy US winter of 2014/2015 caused preliminary direct economic losses of US$ 3.2bn and industry-wide insured losses of US$ 2.3bn, compared with US$ 4.4bn direct economic losses and US$ 2.5bn insured losses for the 2013/2014 winter season. The 2014/2015 aggregated winter storm loss data is based on preliminary information from the Munich Re NatCatSERVICE and Property Claim Services (PCS), reflecting the 11 major winter storms identified by PCS.

Mark Bove, Senior GEO Research Specialist, Munich Re America, said, “The majority of winter storm claims are due to frozen pipes bursting, resulting in water damage to buildings and personal property. The remainder of insured losses across the winter season were primarily associated with roof damage due to the weight of snow and ice, freezing rain events downing trees and power lines, ice damming on roofs, and automobile accidents due to slippery driving conditions.”

The coldest temperatures during the US winter season 2014/15 occurred in February 2015, while record warm temperatures were registered simultaneously in other parts of the country, said Dr. Eberhard Faust, of Munich Re’s Geo Risks Research / Corporate Climate Centre. “If divided in two parts, the eastern part of the US in February had temperatures more than 9°F below average, while temperatures in the western US were more than 7°F above average,” Faust said.

The reason for the cold weather in the eastern US was the repeated influx of arctic air into the central and eastern parts of the country steered by a strong persistent trough of the jet stream. Several strong snow storms in late January and early February brought record snow amounts to the New England states. Boston had the biggest snowfall in that city’s history. In contrast, globally January and February 2015 were the warmest first two months of any year since the start of temperature records, according to the National Oceanic and Atmospheric Administration (NOAA).

The persistent jet stream pattern causing the cold winter on the east coast also caused record heat and continued drought conditions in California. Although a series of powerful winter storms brought heavy rains and high winds to California in early December, causing an estimated US$ 300m in insured loss, the rainfall barely made a dent in the drought. By late December, dry weather again dominated California, and would do so for the remainder of the winter, leading to worsening drought conditions. With record low levels of snowpack in the Sierra Nevada and significantly depleted levels of both surface and groundwater, the government of California implemented its first mandatory state-wide water restrictions in its history. Even with water restrictions in place, the continuing drought will likely impact California’s agricultural industry, and raise the risk of severe wildfires along the wildland-urban interface.

Bove said, “It is currently unclear whether human-made climate change played any role in the severity and duration of the 2015 winter season across eastern North America. However, new research investigating links between climate change and the northern hemisphere winter give some indications that the arctic polar vortex is more likely to become destabilized in a warmer world, potentially leading to more mid-latitude cold outbreaks.”

Munich Re stands for exceptional solution-based expertise, consistent risk management, financial stability and client proximity. This is how Munich Re creates value for clients, shareholders and staff. In the financial year 2014, the Group – which combines primary insurance and reinsurance under one roof – achieved a profit of €3.2bn on premium income of over €48bn. It operates in all lines of insurance, with over 43,000 employees throughout the world. With premium income of around €27bn from reinsurance alone, it is one of the world’s leading reinsurers. Especially when clients require solutions for complex risks, Munich Re is a much sought-after risk carrier. Its primary insurance operations are concentrated mainly in the ERGO Insurance Group, one of the leading insurance groups in Germany and Europe. ERGO is represented in over 30 countries worldwide and offers a comprehensive range of insurances, provision products and services. In 2014, ERGO posted premium income of €18bn. In international healthcare business, Munich Re pools its insurance and reinsurance operations, as well as related services, under the Munich Health brand. Munich Re’s global investments amounting to €227bn are managed by MEAG, which also makes its competence available to private and institutional investors outside the Group.

Disclaimer

This press release contains forward-looking statements that are based on current assumptions and forecasts of the management of Munich Re. Known and unknown risks, uncertainties and other factors could lead to material differences between the forward-looking statements given here and the actual development, in particular the results, financial situation and performance of our Company. The Company assumes no liability to update these forward-looking statements or to conform them to future events or developments.

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