Natural catastrophe losses increasing dramatically: Munich Re

A new study from Munich Re suggests that natural catastrophe losses are on the rise, despite less-than average event totals in the last three years.”One of the main reasons for the steep increase in natural catastrophe losses observed worldwide in recent decades is the mounting concentration of people and property values in exposed cities and agglomerations,” notes a press release accompanying the study.Statistics show that comparing the last ten years to the decade of the 1960s, the number of major events has increased by a factor of 2.6, from 26 to 70. Economic losses, adjusted for inflation, have increased by a factor of 7.3 from US$75.5 billion (Cdn$111 billion) to US$550.9 billion (Cdn$811 billion). But insured losses have grown most dramatically, by a factor of 13.9, from US$6.1 billion (Cdn$9 billion) to US$84.5 billion (Cdn$125 billion).Among the major events of 2002 were the floods hitting central Europe in late summer, which caused EUR3.1 billion (Cdn$5 billion) in insured losses. “The extreme rainfall and discharge amounts observed last year confirm what Munich Re has been forecasting for a long time: that the insurance industry must be prepared to face new loss dimensions due also to global changes in the climate.”The study highlights ways in which such flood catastrophes might be mitigated moving forward, most importantly, by improved early-warning systems. It also looks at the how insurers can use “geographical underwriting” to make risk more transparent. it notes that up to now risks have been classified by postal code only, rather than taking the specific geographic location into account.Finally, the impact of increasing urbanization, including the development of “mega-cities” is explored, with the creation of an index of the 50 largest cities in the world. The index evaluates those cities based on risk potential for all natural catastrophes.