2006 Catastrophes Cost World’s Insurers $15 Billion, Lightest Hit in Years, Swiss Re Estimates

Natural and man-made catastrophes triggered total economic losses of around $40 billion and cost property insurers worldwide $15 billion in 2006, according to preliminary estimates from Swiss Re.

In all, an estimated 30,000 people lost their lives in catastrophes as earthquakes, cold spells, windstorms and also shipping disasters claimed victims.

After years of record losses, property insurers appear to be getting off lightly in 2006: catastrophe losses of only $15 billion will allow them to replenish their risk capital, depleted by record payments for hurricane damage in 2005 and 2004. Up to now, only three loss events in the billion-dollar range have made themselves felt: two tornados in the U.S. and a typhoon in Japan.

Among the last 20 years, 2006 has produced the third-lowest insured losses, after 1997 and 1988. This is attributable mainly to the quiet hurricane season in the U.S. and surrounding countries. Unlike in previous years, Europe has also been spared expensive catastrophes up to now; however, the time for winter storms and floods is by no means over.

Finally, no major industrialized regions have been hit by earthquakes, and very expensive man-made disasters — such as aircraft crashes or large-scale fires — have been conspicuous by their absence.

Economic losses estimated at $40 billion
The geographic distribution of the biggest loss events is reflected in the amounts of both the economic losses and the insured claims. As the typhoons and earthquakes in 2006 hit mainly newly industrializing countries where insured values are relatively low, the directly attributable financial losses were quite mild, at around $40 billion. Of these economic losses of 40 billion worldwide, only $15 billion, or less than one third, were actually covered by insurance.

Catastrophes claim over 30 000 victims
The world recorded nearly 140 natural catastrophes and more than 200 man-made disasters. The number of victims varies widely from year to year; in 2006, more than 30,000 people lost their lives in natural and man-made catastrophes. It was earthquakes that caused the most fatalities: on May 27, an earthquake of magnitude 6.3 almost completely wiped out the city of Bantul on the Indonesian island of Java. On July 17, Indonesia was again shaken by an earthquake. This quake, of magnitude 7.7, triggered a tsunami; quake and tsunami together claimed 800 victims.

Windstorms and floods also claimed more than 11,500 lives in 2006, two catastrophes hitting the Philippines: in February persistent rainfall triggered a mud and rubble slide in the province of Leyte that buried the village of Guinsagon with its approximately 1,000 inhabitants. In late November, heavy rainfall in the wake of typhoon Durian (also known as Reming) sent walls of muddy volcanic ash flowing down the slopes of Mt Mayon on the island of Luzon, burying everything in their path, including the village of Albay. Durian claimed 1,270 victims in the Philippines and more than 80 in Vietnam.

El Nino inhibits hurricane formation
The “El Nino” phenomenon, which appears between September and December, is accompanied by higher-than-normal sea surface temperatures in the tropical Pacific basin. The western equatorial Pacific has been experiencing an El Nino phase with medium-strength typhoon activity since the autumn of 2006. Typhoon Durian for instance wreaked devastation in the Philippines and Vietnam, and Shanshan followed suit in Japan. In the tropical Atlantic basin, by contrast, the gathering El Nino climate constellation was already mitigating the formation of hurricanes in the summer of 2006. Consequently, the US hurricane season, which lasts from early June to late November, brought only two strong and five medium-strength hurricanes in 2006.

Table: The most costly insured events in 2006
Insured Date Event Country
losses (Beginning)
(US$ billion)

1,720 13.04.2006 Tornado, hail US
1,282 06.04.2006 Series of tornados US
1,034 12.09.2006 Typhoon Shanshan Japan
920 11.03.2006 Tornados, floods US
560 23.08.2006 Storms, hail, floods US
500 02.04.2006 Tornados and hail US

Table: The deadliest catastrophes in 2006
Victims Date Event Country
(dead and (Beginning)
missing)
5,778 27.05.2006 Earthquake destroys Bantul Indonesia

1,350 26.11.2006 Typhoon Durian (Reming) Philippines
rains, mudslide on Mt Mayon
volcano
1,333 15.01.2006 Cold spell; Eastern Europe
Power shortges

1,026 02.02.2006 Ferry off coast Egypt

1,000 23.04.2006 Passenger, goods trains North Korea

1,000 12.02.2006 Rain triggers rubble Philippines
and mudslide

Source: Swiss Re
Web site: http://www.swissre.com/