Munich Re calls for urgency as losses of nat re / insured cats hit $ 120 billion in 2021

Globally, the impacts of natural disasters in 2021 cost the economy a whopping $ 280 billion, of which reinsurer Munich Re says about $ 120 billion, or 43%, was covered by reinsurance protection.

The $ 120 billion total is higher than some other estimates for the year, including Swiss Re’s $ 112 billion figure announced in December, although that excludes convection storms and tornadoes on December 10 and 11. in the United States, which Munich Re valued at $ 4 billion.

In 2021, Munich Re finds that overall losses from natural disasters were significantly higher than the $ 210 billion reported in 2020 and the $ 166 billion recorded in 2019.

The same is true for the insured portion, with the $ 120 billion for 2021 eclipsing both the $ 82 billion and $ 57 billion seen in 2020 and 2019, respectively.

With only 43% of the total economic damage insured in 2021, this leads to a protection gap (gap between economic and insured damage) of 57%. Although this is a smaller spread than in 2020, Munich Re attributes this to the higher proportion of losses suffered in the United States in 2021, which is one of the most important insurance markets. mature in the world.

Gallagher Re

“The images of natural disasters in 2021 are worrying. Climate research increasingly confirms that extreme weather has become more likely. Societies urgently need to adapt to increasing weather risks and make climate protection a priority. Insurers assume their responsibilities by covering part of the risks and losses. By applying risk-appropriate premiums, they put a price on natural risks, thus encouraging carefully thought-out behavior to limit losses, ”said Torsten Jeworrek, member of the board of directors of Munich Re.

“At the same time, severe volcanic eruptions and earthquakes in 2021 have shown that we should not neglect these categories of natural disasters either. “

According to figures from Munich Re, the United States accounted for about $ 145 billion of total global economic losses and $ 85 billion, or about 71% of total insured losses.

The United States experienced the costliest natural disaster of the year with Hurricane Ida, which made landfall south of New Orleans as a Category 4 storm on August 29. After hitting the area, the storm moved northeast and caused severe flooding, including in New Jersey and the New York metro area.

According to Munich Re, Hurricane Ida caused total losses of $ 65 billion and losses to the insurance industry of $ 36 billion.

While Ida was the costliest event of the year, the United States was also hit by winter storm Uri in February, with a temperature of -8 ° C (17 ° F) in Houston, au Texas. The unusual event left millions of people without electricity and caused economic losses of more than $ 30 billion, of which Munich Re says more than 50% was insured, making it the third most expensive nat cat in 2021.

As the year started extremely cold in Texas, it ended with a flurry of devastating tornadoes in the states of Arkansas, Illinois, Kentucky, Mississippi, Missouri and Tennessee. The series of storms in the central and southeastern United States claimed the lives of 90 people and resulted in an economic impact of $ 5.2 billion, of which $ 4 billion was insured.

Outside of the United States, a significant rainfall event in July caused severe flooding in parts of Europe, with Germany worst affected. Known as the Bernd Low Pressure System, the event saw some of the highest levels of precipitation in local regions in over a century, causing economic losses of $ 54 billion, of which $ 40 billion in Germany, making it the most expensive country ever for nat cats.

But despite the high overall loss, the impact of uninsured infrastructure losses and limited insurance density for flooding in Germany, according to Munich Re, means insured losses only reached $ 13 billion, and $ 9.7 billion in Germany.

“The disaster statistics for 2021 are striking because some of the extreme weather events are of the type that are likely to become more frequent or more severe due to climate change. These include severe storms in the United States, including during the winter semester, or heavy rains followed by flooding in Europe, ”said Ernst Rauch, head of climate and geology at Munich Re and head of the Climate Solutions unit.

“For hurricanes, scientists predict that the proportion of severe storms and storms with extreme precipitation will increase due to climate change. Although events cannot be automatically attributed to climate change, analysis of changes over decades provides plausible indications of a link with warming atmosphere and oceans. Adapting to the increasing risks of climate change will be a challenge.

In the Asia-Pacific region, Munich Re notes that losses have remained modest with an economic impact of $ 50 billion, of which $ 9 billion is insured. This results in a protection gap of 83%, which shows how low insurance penetration is in many parts of the region.

The region’s costliest nat cat event in 2021 was severe flooding in central China’s Henan Province with an economic cost of $ 16.5 billion, of which Munich Re says only 10 % were insured.

In Japan, a magnitude 7.1 earthquake struck the east coast on February 13, causing an overall loss of $ 7.7 billion and insured damage of $ 2.3 billion, a protection gap of 70% .

Obviously, insurance penetration is much higher in places like the United States and parts of Europe compared to much of Asia-Pacific, but the global gap of 57% shows that there is still a large gap, even in industrialized countries.

According to Munich Re, this gap has narrowed over the past decades in developed countries, but remains unchanged at over 90% in the poorest countries.

“Increased insurance density can help people and countries cope better with the financial consequences of a disaster and help them get back to normal life. Developing concepts in partnership with governments (public-private partnerships) certainly makes sense, ”said Rauch.

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