Insured global losses from natural catastrophes in 2013 totalled around $38bn, according to figures from Swiss Re. Although the cost to insurers was well down on 2012’s $75bn, the catalogue of events contained some important lessons for them.

In the US, the hurricane season was a non-event (see box), but tornadoes hit the headlines twice over. In May, a massive tornado tore through the Oklahoma city of Moore, leaving 24 people dead. Cat modellers estimated that the storm may have caused insured losses as high as $3.5bn, making it the single most expensive tornado in history.

Where were all the Atlantic hurricanes?

The 2013 cat year was also notable for the natural catastrophes that did not happen, despite warnings to the contrary. In fact, the US Atlantic hurricane season had the fewest number of hurricanes since 1982, meaning that the US has seen a record eight consecutive years without a major landfalling hurricane (Category 3 or above).

Most forecasters expected the North Atlantic hurricane season to be highly-active, largely because the sea surface temperatures were high – often a factor in hurricane formation.

AIR Worldwide’s Milan Simic says the inactive 2013 hurricane season affirmed the very high volatility in the relationship between sea surface temperatures and insured losses from hurricanes. “Scientists agree that there were elevated sea surface temperatures but that didn’t correlate directly with high insured losses,” he explains. “By comparison, 2010 had high sea surface temperatures and a very active season, albeit with that activity happening out to sea” he told “It shows that no matter how many signals you can capture, you still don’t have a very good proxy for a relationship with insured losses.”

Then in mid-November, a rare late season outbreak produced 74 tornadoes. The state of Illinois was hit hardest, with numerous fatalities in Washington city and Peoria. Heavy winds knocked out power to thousands of homes across Wisconsin, Ohio, Kentucky, Missouri, and Michigan. The most recent assessments put the economic damage at around $1bn and insured losses at hundreds of millions of dollars.

In Europe, heavy and relentless rainfall in May and June resulted in the worst flooding to hit parts of central Europe in years. Eastern and southern Germany, Austria, and the Czech Republic suffered most, but Switzerland, Hungary, Slovakia, and Poland were also affected. Insured flood losses in Germany were estimated at over EUR1.5bn. In Passau, floodwaters hit their highest level since 1501; the Saale River in Halle, reached its highest level in 400 years of record keeping.

Loss adjustors in Europe had little breathing space. After the rain came hail. Insured losses from three severe hail storms across Germany and into France between June and August could eventually reach EUR2.5bn.

If that wasn’t enough, the winter storm season arrived early, and with a vengeance. Windstorm Christian battered Denmark, Germany, the Netherlands, France, UK, and Sweden in late October (AIR estimated insured losses of between EUR1.5bn and EUR2.3bn). In December, Extratropical Cyclone Xaver affected large parts of northern Europe, packing hurricane force winds and the highest storm surge in 60 years.

The wide spread insured losses in 2013 demonstrated to insurers the importance of modelling every single territory and peril. Milan Simic, managing director of AIR Worldwide, says insurers and reinsurers must make every effort to understand their entire risk profile, including the hard to model perils.

If 2011 was the year that the industry woke up to the potential for huge insured losses from non-US, non-Euro cat regions (namely New Zealand, Thailand and Japan), Simic says, 2013 extended that principle. “It demonstrated just how active the whole world is in terms of catastrophes,” Simic told “It emphasised to insurers the importance of managing aggregates: a small [insurance] line on many events can potentially produce a big aggregate loss.”

Underinsurance gap

The bald facts from the many tragic events of last year also emphasise the problem of underinsurance, an issue explored in the Lloyd’s Global Underinsurance Report. Lloyd’s research showed that some of the countries at greatest risk from natural catastrophes are the least insured against the potential damages resulting from them.

Overall economic losses from 2013’s catastrophic events reached $130bn, more than three times the insured loss. The total loss of life climbed to around 25,000 from 14 000 in 2012.

In the Philippines, Typhoon Haiyan, the most powerful tropical cyclone in modern record-keeping, caused the highest loss of life, according to a Swiss Re sigma report. More than 7,000 people were killed and nearly a million were displaced.

The risk modelling consultant AIR Worldwide estimated that total damage to residential, commercial, and agricultural properties will range between $6.5bn and $14.5bn. However, because insurance penetration in the region is relatively low, insured losses are expected to range between just $300m and $700m, AIR predicts.

The numbers are another reminder that insurance penetration continues to be an issue, especially in high growth economies, according to Steve Bowen, senior scientist with Aon Benfield’s Impact Forecasting.

“While nearly 80% of the economic losses in 2013 were sustained outside of the US, nearly half of all insured losses occurred in the US,” Bowen told “This speaks to the continued dearth of insurance penetration across parts of Asia, Africa, and Latin America, which are prone to significant natural disasters.”