Modest '06 cat losses break with trend

Some 349 natural catastrophes and man-made disasters claimed 31,000 lives around the world in 2006 and caused $48 billion in economic losses, according to a new sigma study by Swiss Reinsurance Co.

The economic losses associated with the catastrophes were limited by the fact that they occurred mainly in developing countries with low property values, said Zurich, Switzerland-based Swiss Re.

Due to low insurance penetration in those developing countries, insured losses from last year's catastrophes stood at $15.9 billion, the third-lowest insured catastrophe loss of the past 20 years after allowing for inflation, Swiss Re said.

The low 2006 loss figures were due mainly to a calm hurricane season in the United States and the lack of severely damaging events in Europe. Overall, natural catastrophes were responsible for approximately $11.8 billion of last year's insured losses, Swiss Re said, with man-made disasters accounting for the remainder.

The most severe of those 2006 man-made disasters were an April explosion in a chemical plant in Port Arthur, Texas; a June steel plant fire in Krefeld, Germany; and a January system breakdown at an iron works in Rio de Janeiro, Brazil, Swiss Re said.

While catastrophe losses were limited in 2006, Swiss Re noted that recent decades have shown a steady trend of increased losses given weather-related catastrophes and a greater concentration of property values in catastrophe-exposed regions.

Going forward, the reinsurer said, the effects of global warming likely will increase losses and lead insurers to modify their catastrophe simulation models to bring them into line with increases in expected damage.

The sigma report, "Natural catastrophes and man-made disasters in 2006: low insured losses," is available online at www.swissre.com.