While 2009 wasn't the best year for insurers due to the soft market and other negative factors, they can take solace in the fact that it was positive in terms of low catastrophe losses when compared to previous years.

Last year, natural catastrophes and man-made disasters claimed approximately 15,000 lives, and cost insurers $26 billion, according to a new sigma study from Swiss Re released today. The total cost to society as a result of the 133 natural catastrophes and 155 man-made disasters was $62 billion. A calm U.S. hurricane season also helped keep costs down since insured losses were below average.

On a worldwide basis, Swiss Re found natural catastrophes cost insurers $22 billion in 2009, while man-made disasters cost an additional $4 billion. Insured losses were highest in North America, where they cost insurers more than $12.7 billion. However, the death toll was the highest in Asia, which claimed 9,400 of the world’s 15,000 catastrophe victims. Insured losses in that region were approximately $2.4 billion.

The study noted that the costliest event last year was European winter storm Klaus, which struck France and Spain in January, and led to insured losses of EUR 2.35 billion (nearly $3.4 billion USD).

Historically, Swiss Re says catastrophe losses have been highly volatile, with a strong upward trend. In U.S. dollars, the historic upward trend for global insured losses is around 10%, and is driven by higher income, increasing wealth, a higher value concentration of wealth in loss-prone regions and a trend toward more insurance coverage. Global warming, and the related higher risk of extreme weather conditions, also contribute to the trend.

"The probability that we see natcat losses as low as those in 2009 is less than 35%," said Thomas Hess, chief economist of Swiss Re. "We have already seen significant events in 2010 with winter storm Xynthia in Europe or the earthquakes in Chile and Haiti. The industry is therefore well advised to prepare for much higher losses. Given their high volatility, losses could easily be three to five times what they were in 2009. In 2005, insured losses set a record when they soared to USD $120 billion. I would not be surprised if this record is broken in the not too distant future."

Secondary perils are important loss sources, but Swiss Re says they receive little attention. In recent years, the primary perils—earthquakes, hurricanes and winter storms—have been in the crosshairs. However, many other natural phenomena, referred to as secondary or other perils, also can cause widespread damage to property. The most prominent secondary perils are flooding, landslides, hail storms, tornadoes, winter storms outside Europe, snow and ice storms, droughts and bush fires. In 2009, more than half of the natural catastrophe loss burden was caused by secondary perils.

“Premiums from primary perils are often used to cross-subsidise losses from secondary perils," said Dr. Jens Mehlhorn, co-author of the sigma study. "The risk is that if premiums deteriorate, they can become insufficient to pay for the sum of losses caused by primary and secondary perils. More advanced probabilistic risk assessment models would help to better gauge and price the risk of secondary perils.”

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