Catastrophe frequency expected to rise in 2000

Natural disasters worldwide last year, and the likelihood of a continued increase in catastrophe frequency, are likely to lead to insurance and reinsurance rate increases, industry rater A.M. Best Co. says. According to initial estimates, 52,000 people died worldwide as a result of catastrophes last year, the total monetary cost is estimated at over US$65 billion, costing the insurance industry more than US$22 billion.

In Europe alone, which has a five year track record of below average event frequencies, two recent major cat losses – the storms Lothar and Martin – caused estimated damages approaching US$10 billion, and insured losses exceeding US$5 billion.

The US$22 billion esimate makes 1999 the most expensive cat loss year since 1994 and the fourth most exepnsive in the history of insurance, according to Swiss Re. Damage from earthquakes, storm and man-made disasters – such as major fires or aviation accidents – reached record figures in 1999. The only reason the loss figures of 1989, 1992 and 1994 were not equaled was because the level of insurance in Turkey and Taiwan (sites of two major earthquakes) was relatively modest.

According to Munich Re, the number of cat events registered in 1999 was well over 700 and far surpassed the record set in 1998 (702), with the ten year average being just over 600. The company released this information in conjunction with its illustrated review of natural catastrophes over the past 1000 years, a study that takes a very close look at developments over the past 50 years.

Munich Re’s study indicates the reason for the cat loss increase is population and urban growth, development of areas exposed to catastrophes, the vulnerability of industrial society to catastrophes and climatic and environmental changes.

A.M. Best, Swiss Re and Munich Re all indicate the higher frequency of catastrophe events will continue in the coming years.