2013...lucky for some?

Hannah Greenwood

The superstitious among us may be feeling a little uneasy about the months ahead but in the world of insurance, each new year brings with it a host of risks and uncertainties.

One of the things which most attracted me to insurance (and the Lloyd’s market in particular) was the industry’s unpredictable nature. Models, probabilities and Realistic Disaster Scenarios help the market to manage risks and exposures but what will happen in any given year remains an uncertainty. And in many ways that’s what makes a career in the insurance industry so exciting.

Almost any news story you read will undoubtedly have some implications for the world of insurance - whether it’s about the political landscape, weather, natural catastrophes, emerging scientific research or a sporting event. The Lloyd’s market remains at the forefront of the changing political and natural landscape to protect businesses against a wide variety of risks.

Each year brings new challenges to the market. 2011 was exceptional in terms of natural catastrophes with earthquakes in New Zealand, floods in Thailand and Australia, severe windstorms in the US and the tsunami and earthquake in Japan causing devastation in the affected communities and major industry losses. Lloyd’s reported a loss before tax of £516m reflecting the frequency and severity of natural catastrophes throughout the year.

In comparison, the insured losses from natural catastrophes in 2012 were significantly lower. Although the number of natural catastrophes increased by 80 compared to 2011, insured losses almost halved. And of course, the largest event for the insurance world last year was Superstorm Sandy.

As part of my graduate placement I have been doing some research on tornado risk in the US. The 2011 tornado season was anomalously active, recording record losses of over $25bn. But in 2012 it was followed by a below average year in terms of activity. Record highs can be followed by record lows.

So what’s in store for 2013? It is impossible to predict what will happen in a given year which is why insurance exists. Despite some years recording major losses others record profits.

The insurance industry remains robust and prepared for the countless number of possibilities. Who’s to know what 2013 will bring…but at Lloyd’s we are keeping our fingers crossed!

Go here to read Hannah's report on tornadoes - Tornadoes: A rising risk?

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