Geo Risks Research Munich Reinsurance Company Topics Recent weather disasters Statistics of natural catastrophes Reasons for increasing losses Risk reduction strategies Conclusions
Weather records and record losses 2005 Pearl River Region/China May - July dead 600 homeless/evacuated 2,800,000 destroyed homes 138,000 total losses 2bn US$ insured losses small Mumbai/India July 25 885 mm rainfall within 12 hours For comparison: annual precip. in Stockholm: 539 mm London: 754 mm Munich: 985 mm Mumbai: 2170 mm economic losses: 5,000m US$ insured losses: 770m US$ Romania entire country hit by numerous inundations between March and September Northern Alps Aug 21-24 losses in million US$ economic insured Switzerland 2100 1525 Austria 700 130 Germany 220 50 Slovenia 4 - Total 3024 1705 US Gulf Coast ( Katrina ) Aug. 25-30 losses in billion US$ economic: 125 insured: 60 deaths: >1300 greatest insured loss in history Hurricane Stan/Central America Oct. 2-4 landslides 900 dead and missing >1600 homeless >150,000 total losses 3350m US$ insured losses 100m US$ Hurricane records 2005 so far mean 2004 named tropical storms: 27 21 10 15 hurricanes (>118 km/h): 14 12 6 9 among the Top 10 (since 1851) there were in 2005 - with regard to intensity (core pressure) Wilma (1., 882 mb) - Rita (4., 897 mb) - Katrina (6., 902 mb) Hurricane Vince (October), most northeasterly hurricane ever observed (near Madeira) First time tropical storm over the Canary Islands (Delta, end of November) First time tropical storm in the South Atlantic (Catarina, September 2004) Hurricane season 2005 estimated total losses: insured losses: 165bn US$ 83bn US$
Great Natural Catastrophes 1950 2005 (% worldwide) 267 loss events 6% 25% 29% 40% Geological events Earthquakes/tsunamis, volcanic eruptions Weather events Storms Floods Extreme temperatures 1,75 million deaths 7% 2% 36% 55% economic losses: 1700bn. US$* 6% 25% 31% insured losses: 340bn. US$* 5% 11% 5% 38% *in values of 2005 2006 Geo Risks Research, Munich Re 79% Great Natural Catastrophes 1950 2005 (% worldwide) 267 loss events 6% 25% 29% 40% Geological events Earthquakes/tsunamis, volcanic eruptions events Weather Storms Floods catastrophes Extreme temperatures 1,75 million deaths 7% 2% 36% 55% economic losses: 1700bn. US$* 6% 25% 31% insured losses: 340bn. US$* 5% 11% 5% 38% *in values of 2005 2006 Geo Risks Research, Munich Re 79%
Great Natural Catastrophes 2004 + 2005 (% worldwide) 15 loss events 2004 + 2005 308 000 deaths 6% 25% 29% 40% Geological events Earthquakes, tsunamis, volcanic eruptions events Weather Storms Floods catastrophes Extreme temperatures 7% 2% 36% 55% Kashmir-Earthq. Tsunami Volkswirtschaftliche economic losses: Schäden: 245bn. 1.700 US$* Mrd. US$* 6% 25% 31% Versicherte insured Schäden: losses: 117bn. 340 Mrd. US$* US$* 5% 11% 5% 38% *in values of 2005 2006 Geo Risks Research, Munich Re 79% 180 160 140 120 100 Great Weather Catastrophes 1950 2005 Economic and insured losses economic losses (in values vof 2005) insured losses (in values of 2005) trend economic losses trend insured losses bn. US$ 80 60 40 20 0 1950 1955 1960 1965 1970 1975 1980 1985 1990 1995 2000 2005 2006 NatCatSERVICE, Geo Risks Research, Munich Re
Great Flood Catastrophes 1950 2005 2004 Economic and insured losses 70 60 Economic losses Insured losses? 50 Billion US$ (2004 values) 40 30? 20 10 0 1950 1955 1960 1965 1970 1975 1980 1985 1990 1995 2000 Year 2006 Geo Risks Research, Munich Re Great Natural Catastrophes 1950-2005 Decade comparison Decade Decade Decade Decade Decade last 10 Factor 1950-1959 1960-1969 1970-1979 1980-1989 1990-1999 1996-2005 last 10:60ies Number 21 27 47 63 91 57 2.1 Economic losses 48 88 152 247 728 575 6.6 insured losses 2 7 15 30 138 176 25 losses in bn. US$ (2005 values) MRNatCatSERVICE 2006 Geo Risk Research, Munich Re
Great Flood Catastrophes 1950-2005 Decade comparison Decade Decade Decade Decade Decade last 10 Factor 1950-1959 1960-1969 1970-1979 1980-1989 1990-1999 1996-2005 last 10:60ies Number 6 6 8 18 26 12 2.0 Economic losses 34 24 22 31 254 127 5.3 insured losses 0.4 0.3 0.6 1.6 9.1 7.6 25 losses in bn. US$ (2005 values) MRNatCatSERVICE 2006 Geo Risk Research, Munich Re Why only great natural catastrophes?... because neglecting the development in worldwide communication activity during the past decades extremely biases the statistics of ALL loss events. It may even lead to wrong trends.
What are great natural catastrophes? The affected region's ability to help itself is distinctly overtaxed Interregional or international assistance is necessary Thousands are killed Hundreds of thousands are made homeless Substantial economic losses Considerable insured losses 2005 Geo Risks Research, Munich Re, in keeping with United Nations definition criteria Main reasons for increased flood losses Increase in population residents, refugees, tourists Change in environmental conditions loss of retention areas, acceleration of flood waves Changes in land-use exposure to flooding Accumulation of values creation of loss potential Increase in vulnerability high chance of destruction Lack of risk awareness and wrong risk perception Feeling of safety behind the dyke
Climate Change The hottest years since 1856 (150 years) All of the 10 hottest years occurred within the last 18 years 1. 1998 2. 2005 3. 2002 4. 2003 5. 2004 6. 2001 7. 1997 8. 1995 9. 1988 10. 1987 * Global mean temperature near the ground (source: WMO) Climate Change Global Mean Temperature, 1856 2005 Deviations from mean 1961-1990 2005: +0,47 C above the 1961-1990 annual mean. Source: CRU, UK (2006), compilation acc. to WMO
Climate Change Today 380 ppm x CO 2 -concentrations during the last 400,000 years Source: Vostok (Antarctica) ice cores, World Data Center for Paleoclimatology, NOAA, Boulder, CO, USA Climate Change Model forecast of changes in annual mean air temperatures ( C) (comparison 1980 with 2080) source: IPCC
Climate Change Model forecast of changes in annual precipitation (%) (comparison 1980 with 2080) source: IPCC Climate Change Changes in Sea Surface Temperatures NATL = North Atlantic WPAC = West Pazific SPAC = South Pazific EPAC = Esta Pazific NIO = Northern Indic SIO SH = Southern Indic = Oceans of the Southern Hemisphere Source: Webster et al. (2005), Science Vol. 309.
Climate Change - Annual number of tropical cyclones formed in the North Atlantic in natural cold and warm cycles 25 20 Tropical Storms + Hurricanes Hurricanes (Category 1-5) Major Hurricanes (Category 3-5) Annual frequencies of major Hurricanes in warm or cold phases Warm Phase Cold Phase War m Pha se Number of Storms 15 10 Cold Phase 5 4.1/year 1.3/year 2.6/year 1.5/year 0 1850 1875 1900 1925 1950 1975 2000 Data source: NOAA, re-handling by Munich Re 2005 Climate Change Comparison of average annual U.S. landfall frequencies between different climatic phases Change in average annual number of landfalls between the last cold phase (approx. 1971 to 1994) and the current warm phase since approx. 1995: Cat. 3 5 hurricanes: + 233% (from 0.3 to 1.0) Primarily indicative of the natural climatic oscillation. Change in average annual number of landfalls between the last warm phase (approx. 1926 to 1970) and the current warm phase since approx. 1995: Cat. 3 5 hurricanes: + 67% (from 0.6 to 1.0) Primarily indicative of the influence of global warming.
Changing risk Climate Change Increase in greenhouse gases Increase in temperature air + sea Increase in humidity Increase in sea level - higher weather variability - more frequent events - stronger events - more loss events - higher losses Risk reduction How can we What reduce is risk the risk? risk? hazard Risk = f ( vulnerability ) f ( values at risk by reducing one or more of these influencing factors
1. Preparing for floods Avoiding high flood peaks Strategies against the flood risk 2. Preparing for flooding Preventing high-value areas from flooding 3. Preparing for losses Limiting and reducing damage 4. Preparing for risk Preparing (financially) against ruin Risk reduction requires Public authorities Partnership People concerned Insurance industry
Main tasks of the partners Public authorities/organisations basic prevention measures - avoiding frequent losses - mitigation during rare events People concerned/affected actions during rare events loss reduction/limitation Insurance industry securing existence - prevention of ruinous consequences for personal/ business property - information about the risk Main tasks of the partners - land-use regulations - technical flood control - observation networks - forecasting and warning - flood retention - give information
Main tasks of the partners - proper construction - spot protection - appropriate behaviour (alarm plan, checklist) - get information - risk awareness Main tasks of the partners - assumes part of the risk - proper risk assessment - adequate contracts (deductibles, limits, exclusions) - accumulation control - give information
Insurance aspects Why is there a need for re-insurance? Insurance clients Primary insurer Reinsurer Insurance aspects Example of re-insured losses Hurricane Gilbert (Jamaica 1988) economic loss: insured loss: 2 000 Mio. US-$ 700 Mio. US-$ re-insured loss: 690 Mio. US-$ (99 %) typical percentages of reinsured losses: weak markets: >90% strong markets <50%
Climate change is happening already, it cannot be stopped anymore, just attenuated. Natural catastrophes, especially weather related events, are increasing dramatically in number and magnitude. Loss potentials have reached new dimensions. There is more and more scientific evidence for causal links between global warming and increasing frequencies and intensities of natural catastrophes. The world s societies as well as the insurance industry have to adapt to the changing risks.
The main driving factors are: - settling in flood-prone areas, - higher and more vulnerable values, - climatic and environmental changes, - too low risk awareness and too short memory. We must learn to live with floods. At the same time, we must establish a culture of coping with the resulting risk. This requires a risk partnership between authorities, the people concerned and the insurance industry.
crucial: Keep awareness awake!... on all levels and within all groups of the society Pub in Cologne: Water level Chrstmas Eve 24.12.1993 10,64 m