CATS SHOW NO SIGN OF BEING TAMED

The number of catastrophes and their costs continue to rise, according to the latest annual survey of world disasters published by Munich Reinsurance Co. of Germany.

A comparison of the past 10 years with the 1960s reveals a quadrupling in the number of great natural catastrophes over this period. After allowing for inflation, economic losses were eight times as high, while insured losses were 15 times as high, Munich Re says in its annual review of natural catastrophes.

Moreover, "a reduction in this trend is not to be expected in the foreseeable future," the report predicts.

"On the contrary, its primary causes, in particular the rapid increase in the concentration of populations and values in cities exposed to catastrophes and the growing susceptibility to losses inherent in our modern industrial society suggest that this trend will become even more pronounced in the future," the report notes.

According to Munich Re, the world suffered losses of more than $60 billion from natural catastrophes during 1996, of which $9 billion was insured. There were 12,000 fatalities last year.

Although this compares favorably with the exceptionally bad year of 1995, which set a new record of $180 billion in absolute losses as a result of the Kobe earthquake in Japan (BI, Jan. 23, 1995), it still is part of an increasing trend in losses, the report states.

Last year's losses were the first time this decade that insured losses fell below $10 billion, "chiefly due to the low insurance density in the areas worst affected but also due to a fortuitous lack of extreme loss events in 1996," the report explains.

Munich Re registered 594 natural catastrophes in 1996, a similar figure to 1994, when there were 597 and 1995, when there were 579.

Asia was again the most severely affected continent, accounting for 31% of loss events, 80% of casualties and 61% of economic losses.

The United States, however, suffered the most insured losses, with 81% of the total.

Windstorm and flood accounted for 62% of all natural catastrophes, 85% of all casualties, 90% of economic losses and 90% of insured losses.

In its 16-page annual report, the German reinsurer highlights the increasing threat to cities from natural catastrophes.

Munich Re claims in the report that an extreme natural catastrophe in one of the world's major metropolises or industrial centers could cause the collapse of entire countries' economic systems and could even bring about the collapse of the world's financial markets.

On the basis of the experiences of the 1995 Kobe earthquake, extrapolations for a similar or more severe earthquake in the greater Tokyo area estimate losses at between $1 trillion and $3 trillion, Munich Re states in the report.

"With losses of these dimensions, it is difficult to predict what global shock waves such a catastrophe would have," the report notes.

Meanwhile, urbanization is increasing worldwide, according to United Nation figures.

In 1950, about 30% of the world's population-then 2.5 billion-lived in cities; now, about 45% of the world's 5.7 billion people live in cities. This is predicted to increase to more than 60% of a total population of 8.3 billion by 2025.

At the same time, the number of cities with more than 1 million inhabitants has grown to 325 today from 83 in 1950.

Moreover, Munich Re points out that large population centers are spreading into highly exposed areas, such as along rivers exposed to flooding; along coasts exposed to storms; and in areas exposed to landslide, rockfall, avalanche or forest fires.

In addition, city people are more dependent on the infrastructure, such as water supply, electricity, and transport, than more self-reliant rural populations, the report suggests.

"Numerous natural catastrophes of recent years have shown quite emphatically how vulnerable the infrastructures of major cities are to minor breakdowns and how acute shortages in supply can develop within a short time," the report points out, adding that industry "is more than ever dependent on a perfectly working infrastructure."

Munich Re also points out several ways cities can exacerbate the hazards of nature. According to the report, these include:

Intensification of storm systems due to thermal convection above warm cities.

Exposure to flooding, as most of the city's area is sealed with concrete and asphalt, leaving much of the rainwater running above the ground.

An increased loss potential of extreme hailstorms because of the concentration of property.

An increasingly frequent occurrence of lightening strikes because of towering buildings with masts.

"It is in cities that the problems are most serious and that rapid and effective countermeasures (are) most urgently required," the report concludes.

The report also highlights the increasing evidence of the greenhouse effect.

In 1996, the mean global temperature of the earth's lower atmosphere was 0.21 degrees Celsius higher than the mean value recorded for the climatological standard period from 1951 to 1980, Munich Re states.

1996 was also one of the warmest years since worldwide meteorological records began about 150 years ago. Indeed, the 10 hottest years have occurred since 1980.

Computer models predict the mean global temperature will increase by a further 1-3.5 degrees Celsius within the next 100 years, resulting in temperatures man has never experienced before, Munich Re warns.

This will mean "we will be confronted with a massive increase in the occurrence of extreme meteorological values that will frequently result in catastrophes because the people in the regions affected have not experienced such conditions and have therefore not been able to take appropriate loss prevention measures," Munich Re predicts in the report.

For more information, contact Gerhard Berz, Munich Reinsurance Co., D-80791, Munich, Germany; 49 89 389 15291; fax: 49 89 389 15696; or on the World Wide Web, http://www.munichre.com