Economy Driving Rise in Industry’s Catastrophe Losses

Experts on natural catastrophe risk at Allianz highlighted the growing trend in insured losses arising from natural catastrophes worldwide in a risk briefing, the “Allianz Risk Pulse: Focus Natural Catastrophes,” released earlier today. The average annual cost of insured claims from natural catastrophes has increased eight-fold since 1970 (up from some $5 billion in the 1970s and 1980s to more than $40 billion in 2010).

The main reason is economic growth: Property values are rising, population density and insurance penetration are increasing, often in high risk areas—a trend that is compounded by the fast growth of some Asian economies in catastrophe-prone regions. The impact of climate change must also be closely watched.

Allianz analysts also have noted that, during the past decade, the earthquakes that have caused the highest fatalities were not necessarily the strongest ones. For example, the 2010 quake in Haiti released 500 times less energy than the quake that hit Chile two months later, yet the Haitian quake wreaked much more havoc. The factors that determine the impact are complex, and include building design and materials, severity of secondary earthquake effects like tsunamis or fires and lack of preparedness.

The insurer points to proper risk management prior to an event, and preparation for a possible natural disaster as key factors in reducing the impact. Using their experience of risk management and claims investigations, insurers such as Allianz can advise their clients on how to analyze risks including natural catastrophes, how to prepare in advance and (for businesses) how to restore operations quickly after an event—a vital element in minimizing business interruption losses.

The insurance industry plays an important role when it comes to helping those affected by natural catastrophes, advising on preparedness and prevention and analyzing risk, notes the report. Teams of claims regulators, risk managers, natural catastrophe experts and economic research specialists work hard to support clients and to understand natural catastrophes and their effects.

"Terrible events like major natural catastrophes illustrate the value and importance of insurance to society," says Clement Booth, board member of Allianz SE in the Allianz Risk Pulse. "The most important thing is to help those affected unbureaucratically and quickly—and to have a lot of empathy."

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