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Global disasters cost insurers $54 billion in 2016

Posted On: Mar. 28, 2017 12:17 PM CST

Global insured losses from natural catastrophes and man-made disasters jumped to $54 billion last year, up 42% from 2015, the Swiss Re Institute said Tuesday.

Total economic losses in 2016 nearly doubled over the previous year, a sigma report by the Swiss Re Ltd. research arm said, jumping to $175 billion last year from $94 billion in 2015 as earthquakes, storms, floods and other disasters inflicted damage around the world.

Last year’s insured and economic losses both hit their highest point since 2012 and reversed the downtrend of the last four years, Swiss Re said, due to such major events as earthquakes, storms, floods and wildfires.

Some of these events struck areas with high insurance penetration, which accounted for the 42% increase in insured losses, the report said. 

Globally there were 327 disaster events in 2016, 191 of them natural catastrophes and 136 man-made. As in the previous four years, Asia was hit worst in terms of the number of disaster events, with 128, and resulting economic losses that totaled roughly $60 billion.  The earthquake on Kyushu Island, Japan, in April inflicted the heaviest economic losses, ranging between $25 billion and $30 billion. 

Around 11, 000 people died or went missing in disasters worldwide in 2016, down from more than 26 000 in 2015.

There were large-scale disasters across all regions in 2016, Swiss Re said, including earthquakes in Japan, Ecuador, Tanzania, Italy and New Zealand. 

In Canada, a wildfire across the wide expanses of Alberta and Saskatchewan turned out to be the country’s biggest insurance loss event ever, and the second-costliest wildfire on sigma records globally. There were also a number of severe floods in the United States, Europe and Asia, along with Hurricane Matthew, the first Category 5 storm to form over the North Atlantic since 2007. 

Matthew also caused the single largest loss of life, with more than 700 people dying, mostly in Haiti.

Alberta and Saskatchewan, Canada, benefited from having insurance in 2016, Swiss Re said, after being hit by wildfires from May through to July that were sparked by severe dry weather. This was also the most destructive wildfire, burning many buildings and 590,000 hectares of forestland. 

Many homes were destroyed and around 88,000 people were evacuated from the impacted areas. Overall economic losses from the fires were $4 billion, with close to $2.8 billion, or 70%, covered by insurance. There were record payouts by insurers, and 68% of all personal property claims had been settled by the end of the year, Swiss Re said.

There were also many severe storms in 2016, which triggered major flooding over large areas. 

At the end of May and the beginning of June, thunderstorms, torrential rain and flooding hit France, southern and central Germany and Belgium, leading to combined economic losses of $3.9 billion and insured losses of $2.9 billion. 

In China, there was extensive flooding along the Yangtze River basin in July. The economic losses were estimated to be $22 billion, making it the costliest Yangtze River flood event since 1998. The insured losses were just $400 million due to low insurance penetration, Swiss Re said.
There were four separate multibillion-dollar-loss floods in the U.S. during 2016, the worst being the inland flooding of southern Louisiana and Mississippi in August.  The banks of many rivers burst after extreme rainfall, resulting in widespresad flooding of adjacent areas, and accumulated economic losses of $10 billion, the report said. 

Swiss Re said flood risk remains critically underinsured in the U.S., even though much of the country is exposed to flooding. In the case of the Louisiana and Mississippi floods, less than a third of the economic losses — around $3 billion — were covered by insurance, according to the report, which includes a special chapter on the level of underinsurance of flood risk in the U.S.

"In 2016, both economic and insured losses were close to their 10-year averages. Insured losses made up about 30% of total losses, with some areas faring much better because of higher insurance penetration," says Kurt Karl, Swiss Re’s New York-based chief economist. 

North America accounted for more than half the global insured losses in 2016, largely due to a record number of severe convective storm events in the U.S. and because the level of insurance penetration for such storm risks in the U.S. is high. 

The costliest was a hailstorm that struck Texas in April, resulting in economic losses of $3.5 billion, of which $3 billion were insured, the report said.