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2011 disasters prove costly for insurers

Economic losses hit first-half record

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Catastrophes worldwide caused an unprecedented $260 billion in economic losses during the first half and $55 billion in insured losses, Munich Reinsurance Co. and the Insurance Information Institute Inc. said last week.

The first-half insured losses are more than double the amount during the comparable period last year and more than four times the 10-year average, Munich Re and the III said during a webinar.

There were $220 billion in economic losses in 2005, when Hurricane Katrina hit. That was the previous record year for economic losses, the German reinsurer and New York-based trade association said.

The March 11 earthquake in Japan contributed $210 billion to the economic losses so far this year.

“It's been a momentous first half of the year—one for the record books,” said Robert P. Hartwig, III president and chief economist, in noting earthquakes in Japan, New Zealand and Chile and a string of U.S. tornadoes during recent months.

La Niña, characterized by unusually cold temperatures in the Pacific Ocean, “is driving the extreme losses this year, but there's increasing evidence that there's also a contribution of global warming,” said Peter Hoppe, head of Munich Re's Geo Risks Research/Corporate Climate Center. While there have been many La Niña events in past decades, he said none has created such extreme events as this year.

Carl Hedde, Munich Reinsurance America's head of risk accumulation, listed events such as wildfires in Arizona; blizzards in the Midwest; tornadoes in Joplin, Mo., and Tuscaloosa, Ala.; and the deadliest U.S. thunderstorm season in more than 50 years.

In the United States, where insurance penetration is relatively higher than other parts of the world, 100 events in the first half of 2011 produced $27 billion in overall losses and $17.3 billion in insured losses, which Munich Re and the III said are well above the 10-year averages of $11.8 billion and $6.6 billion, respectively.

“The total is still climbing” for the number of insured losses from natural disasters in the United States, Mr. Hedde said during the webinar presented by Munich Re and the III and available on Munich Re's website.

Mr. Hartwig said despite projections of 16 named storms for the current hurricane season vs. a 9.6 annual average, “there's no question at all about whether insurers or reinsurers can meet their obligations.”