2010: A Game of Two Halves

The first half of 2010 has kicked up insured natural catastrophe losses totalling US$22bn, more than double the first half average since 2000 and even higher when compared to 2008, when the previous record for half losses was set.

These first 6 months this year have seen exceptional large number of cats, 440 (four-four-zero) events to be exact, with overall economic losses totalling US$70bn, according to Munich Re’s recent press release.  Morgan Stanley’s Fat Tail Friday report (30 June) provides a graphic charting these first half global cat losses by Insured Loss:

The most significant first half event affecting the insurance industry is the Chile earthquake that occurred off the coast of the Maule Region on February 27, 2010. It rated a magnitude 8.8 on the moment magnitude scale, lasting 90 seconds.

While releasing 500 times the energy of the Haiti earthquake tragedy, the Chilean earthquake claimed only ~0.5% of the casualties (500 vs 220,000) largely thanks to good seismic building code standards. Munich Re estimates the economic loss to be US$30bn with insured loss of US$8bn (Swiss Re’s estimates US$4 to 7bn). The Insurance Insider (July edition) highlights the uncertainty around the eventual ultimate claims from the Chile earthquake, citing underwriter views that the industry loss could eventually reach $15bn.

In a recent press release, Lloyd’s announced current estimates for net claims before tax in the order of US$1.4billion to the devastating Chilean earthquake. Lloyd’s CEO Richard Ward points out “These figures are our estimates of the market’s total exposure. The claims relating to the Chilean Earthquake will evolve for some time.’ 

Notable atmospheric events include severe flooding (Madeira, several US states, central Europe and China), and of course Winter Storm Xynthia in Europe.  And with the 2010 hurricane season only just kicked off, the second half of 2010 will be challenging year for the insurance industry.

As for England and their attempt to win the World Cup, I blame it on two catastrophes - a lack of home grown talent and the wrong formation

…I make that four-four-two.