Mother Nature inflicts damage worth $218bn in 2010

2010 saw four major earthquakes, vast floods across Asia, tornadoes, wind and hailstorms, heatwaves and wildfires as well as winter ice and snowstorms. The total bill to the global insurance industry from these catastrophes reached over $43 billion – 60% more than in the previous year, according to a study published by Swiss Re.

“2010 was not only characterised by severe earthquakes that ranked among the deadliest, costliest and most powerful in history, but also by a series of extreme weather events, such as major floods,” says Thomas Hess, Swiss Re’s Chief Economist.

In January an earthquake in Haiti triggered a humanitarian disaster, killing over 220,000 inhabitants and leaving more than 1 million homeless. The country is still struggling to recover from its biggest natural catastrophe in living memory.

Barely a month later an 8.8 magnitude earthquake struck Chile. Although 500 times stronger than the tremor in Haiti only 521 people lost their lives in the Chilean disaster. But it cost insurers an estimated $8 billion, while September’s New Zealand earthquake is expected to cost a further $4.4 billion. These two events accounted for nearly one third of insurers’ total claims from natural disasters during the year.

Although the earthquakes were particularly destructive, last year’s overall insurance bill from natural catastrophes was in line with the 10-year average. That is because claims from hurricanes in the US were unusually low, despite the fact that 2010 was the warmest year since records began in 1880.

That helped brew plenty of hurricanes – the second highest number in 25 years – but remarkably none made landfall in the United States. The country did not emerge completely unscathed, however: a series of smaller thunder and hailstorms and tornadoes caused damage that cost insurers more than $15 billion.

The year also saw the Deepwater Horizon oilrig disaster, the worst offshore oil spill in American history, which saw nearly 5 million barrels of oil spew into the Gulf of Mexico. This is expected to cost the insurance industry over $1 billion. 
“That Lloyd’s made a healthy profit in 2010, despite facing very large claims from a range of tragic disasters shows the market’s strength and resilience,” Lloyd’s Chairman Lord Levene tells lloyds.com.   

2011: another year, more disasters

This year has already been marked by large disasters, including widespread floods that engulfed much of eastern Australia and major earthquakes in Christchurch, New Zealand and Sendai, Japan. Insurance claims resulting from the disaster in Christchurch are alone expected to total $6 billion -$12 billion.

No long-term trend of increasing earthquake activity has emerged, but the number of deaths and insured losses from tremors is increasing. “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,” says Balz Grollimund, one of the study’s authors.

Insurers face significant headwinds in 2011 and beyond, says Lloyd’s Chief Executive Richard Ward. “So far this year we have seen an extraordinary number of enormous natural catastrophes.  Meanwhile rates continue to fall, reflecting the excess capital across the industry, and the industry is facing major regulatory change, with the splitting up of the FSA and the introduction of Solvency II. It is crucial we help steer Lloyd’s safely through these challenges, but I am confident we are positioning the market to take advantage of opportunities in the future.”