Disasters Cost Insurers $43 Billion in 2010

A new sigma study from Swiss Re reveals what many insurers already knew—that 2010 was a horrific year in many ways. Worldwide economic losses as a result of natural and man-made disasters last year totaled $218 billion—more than triple 2009's $68 billion sum. On top of this, the global insurance industry was on the hook for more than $43 billion of that—a greater than 60% rise from 2009.

Of course, the monetary losses pale in comparison to the loss of human lives incurred. Last year, 304,000 people lost their lives in these disasters, representing the highest number since 1976.

Swiss Re's research broke down the $43 billion total cost to insurers, finding that natural catastrophes cost about $40 billion, while man-made disasters resulted in additional claims of more than $3 billion. By comparison, overall insured losses totaled $27 billion in 2009.

“Insured losses were highest in North America in 2010, where they exceeded USD 15 billion," says Lucia Bevere, one of the study’s authors. "Despite very low hurricane losses due to the absence of hurricanes making direct landfall in the U.S., a series of lesser storms throughout the year resulted in this high figure.”

According to the report, earthquakes accounted for nearly 33% of all catastrophe losses in 2010. The February 2010 earthquake in Chile and the September earthquake in New Zealand were the two costliest events in 2010, and led to estimated insured losses of $8 billion and $4.4 billion, respectively. However, overall claims in 2010 were in line with the 10-year average with the high number of earthquake losses making up for unusually modest U.S. hurricane losses.

“Although no long-term trend of increasing global earthquake activity has emerged, the number of fatalities and insured losses from earthquakes are on the rise," notes Balz Grollimund, one of the study’s authors. "The main reasons are population growth, the higher number of people living in urban areas as well as rising wealth and rapidly increasing exposures. Many of these rapidly growing urban areas are located in seismically active areas.”

Looking back at the year's catastrophes, Swiss Re Chief Economist Thomas Hess says that these events highlight an urgent need to improve prevention and post-disaster management as a means of reducing human suffering

"The rapidly increasing wealth in emerging markets should also be used to address these problems," he adds. "This wealth will also allow insurance to grow and close part of the large insurance protection gap in many emerging markets, the main reason why the financial protection against catastrophes is low in most emerging markets.”

For the complete study, click here.