Comparatively few major natural catastrophe losses in first half of 2014: Munich Re

The first half of 2014 saw approximately 490 loss-relevant natural catastrophes, with overall economic losses of US$42 billion and insured losses of US$17 billion to the end of June, Munich Re reports.

The overall economic losses and insured losses for the first half of the year were considerably below the average for the past 10 years – namely US$95 billion and US$25 billion, respectively), notes a statement issued Wednesday by Munich Re.

Of the approximately 490 loss-relevant natural catastrophes, the highest economic losses arose in the United States (35%), followed by Europe and Asia (both at 30% apiece).

Munich Re cautions, however, “towards the end of the year the natural climate phenomenon El Niño may impact regions differently in terms of the number and intensity of weather extremes.”

Despite natural catastrophes being relatively mild so far in 2014, “we should not forget that there has been no change in the overall risk situation,” Torsten Jeworrek, Munich Re’s board member responsible for global reinsurance business, says in the statement. “Loss minimization measures must remain at the forefront of our considerations. They make absolute sense from a macroeconomic perspective, as lower subsequent losses mean that they mostly generate savings of several times the investment amount. And they protect human lives,” Jeworrek continues.

Some of the events to date in 2014 include the following:

• The February snowstorms in Japan – the most costly natural catastrophe worldwide in the first half of 2014 – hit Tokyo and central Japan in particular, resulting in overall losses of about US$5 billion and insured losses of more than US$2.5 billion;
• Various blizzards during a record winter in North America – with extremely cold temperatures and heavy snowfalls over a longer period in many parts of the U.S. and Canada – produced losses of about US$3.4 billion, with the most costly snowstorm during the first week of January resulting in losses totalling US$2.5 billion, of which US$1.7 billion was insured. In many instances, the harsh winter also had a heavy impact on business, as companies were forced to stop production.
• The mild winter in Europe contributed to the heavy floods in England that lasted into February. With mainly rural areas being affected, overall losses remained within an acceptable limit of US$1.3 billion and insured losses of about US$1.1 billion.
• Heavy flooding in the Balkans as far east as Romania in May caused very high economic losses, with precipitation in many places reaching the highest levels ever registered since records began more than 100 years ago. High flood levels caused overall economic losses of US$4 billion, but the relatively low level of insurance penetration meant insured losses were not very high.
• A storm front that passed over western Germany on June 9 caused localized heavy damage as a result of wind squalls and hailstones, particularly around Düsseldorf. Overall, insured losses were US$890 million, and overall losses amounted to around US$1.2 billion. Overall losses in the various countries amounted to US$3.1 billion, of which US$2.5 billion was insured.
• The U.S. weather agency National Oceanic and Atmospheric Administration (NOAA) recorded 721 tornadoes as of the end of June, compared to an average of 1,026 in the years 2005-2013. The tornado season in the U.S., which peaks from May to July, has been below average so far, although some outbreaks caused significant damage, including an extremely rare twin tornado in Nebraska.

Over the rest of the year, weather events will probably see increasing impact from ENSO, a naturally occurring phenomenon that involves fluctuating ocean temperatures in the equatorial Pacific, Munich Re notes in the statement. “It currently looks as though a moderate El Niño will develop by the autumn, with warm water from the South Pacific moving from west to east, thus shifting wind systems and precipitation across the Pacific basin,” says Peter Höppe, head of Munich Re’s Geo Risks Research Department.

Hurricane activity in the northern Atlantic normally decreases during El Niño phases, the number of typhoons in the northwest Pacific usually increases, but they make landfall more rarely, and tornado activity increases in the U.S., the statement adds. This gives a different distribution of losses across regions.

“The stronger the El Niño, the more likely it is that there will be a La Niña in the following year, when hurricane activity tends to increase,” Höppe says.