The cost of natural catastrophes to the global insurance market has increased eight fold in the space of the past 40 years according to new research from German insurance giant Allianz.
The underwriter’s natural catastrophe risk experts have highlighted the growth trend in insured losses arising from natural catastrophes worldwide in a risk briefing published this week
The report found the average annual cost of insured claims from natural catastrophes has increased 800 percent since 1970 up from some $5 billion in the 1970s and 1980s to over $40 billion in 2010. The main reason is economic growth: property values are rising and areas of population density are expanding, often in highly at-risk areas – a trend that is compounded by the fast growth of some Asian economies in catastrophe-prone regions.
However, the Allianz analysts also found that, during the past decade, the earthquakes which caused the highest fatalities were not necessarily the strongest ones. For example, the 2010 quake in Haiti released 500 times less energy than the quake that hit Chile two months later – yet the Haitian quake wreaked much more havoc.
“The factors which determine the impact are complex and include building design and materials, severity of secondary earthquake effects like tsunamis or fires and lack of preparedness,” it added.
Proper risk management prior to an event and preparation for a possible natural disaster are identified as key factors in reducing the impact.
The underwriter said: “Using their experience of risk management and claims investigations, insurers such as Allianz can advise their clients on how to analyse risks including natural catastrophes, how to prepare in advance and – for businesses - how to restore operations quickly after an event – a vital element in minimising business interruption losses.
“The insurance industry plays an important role when it comes to helping those affected by natural catastrophes, advising on preparedness and prevention and analyzing risk. Teams of claims regulators, risk managers, natural catastrophe experts and economic research specialists work hard to support clients and to understand natural catastrophes and their effects. “
“Terrible events like major natural catastrophes illustrate the value and importance of insurance to society,” says Clement Booth, board member ofAllianz SE. “The most important thing is to help those affectedunbureaucratically and quickly – and to have a lot of empathy.”