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Spurred by $28.2 billion in insured losses caused Superstorm Sandy, 2012 was a considerably higher than average in terms of catastrophe losses for the insurance industry, according to a report released by Aon P.L.C.'s Aon Benfield unit on Friday.
Prepared by the reinsurance intermediary's catastrophe modeling unit, Impact Forecasting, the report said the global total of $72 billion in insured losses seen in 2012 was 36% higher than the 10-year average of $53 billion.
Conversely, the $200 billion in total economic losses seen in 2012 were only slightly above the 10-year average of $187 billion. Aon Benfield credits the fact that the two most costly events of the year occurred in the United States, which has higher-than-average insurance penetration, for the disparity. In fact, Superstorm Sandy and a yearlong drought accounted for two-thirds of all 2012 insurance losses globally and nearly half of all economic losses for the year, the report notes.
“After a year in which Asia and Oceania sustained significant natural disaster losses, the focus shifted back to the United States in 2012,” Steve Bowen, senior scientist and meteorologist at Impact Forecasting, said in a statement. “The country was hit by nine separate billion-dollar insured loss events, including Hurricane Sandy and the most extensive drought since the 1930s.”
Nonetheless, the report notes that tornado activity in 2012 was dramatically lower than 2011 and that 2012 marked the seventh consecutive year that no major hurricane made landfall in the United States, a streak not seen since the 1860s.
“Despite growing support for 'the new normal' theory of a world dominated by rapidly escalating global catastrophe losses, our study highlights that 2012 returned to a more normal level of losses after the extreme economic and insured losses of 2011,” Aon Benfield Analytics CEO Stephen Mildenhall said in a statement. “While nominal catastrophe losses are increasing at an alarming rate, economic losses as a percent of global GDP — a measure appropriately normalized for inflation and economic development — has remained relatively stable over the past 30 years.”
Superstorm Sandy's pummeling of coastal New York and New Jersey exposed a stark need among property/casualty insurers and their clients to adapt their catastrophe risk management strategies, a panel of senior industry executives said Tuesday.