Natural Catastrophes Cost $150B in 2019, with Insurers Paying $52B: Munich Re

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Natural catastrophes caused overall losses of US$150 billion during 2019, including insured losses of about US$52 billion, which matches the average of the past 30 years, according to Munich Re’s catastrophe update.

The reinsurer said the protection gap (the difference between overall economic losses and insured losses) was higher in 2019 than in 2018, due largely to the high share of flood losses, which are often not insured to the same extent as wind damage in most industrial countries.

Nevertheless, Munich Re said, the insured portion of overall losses, which was slightly above 35%, matches the average of the past 10 years. The ongoing protection gap is evidence that large sections of the market remain uninsured, especially in emerging and developing countries, the reinsurer continued.

Typhoons in Japan – Hagibis and Faxai – caused the year’s biggest losses in terms of both overall economic losses and insured losses as well as bringing the country’s second consecutive year of record cyclone losses, the report said. Hagibis caused an estimated US$17 billion in overall losses, with insured losses of about US$10 billion, while Faxai caused overall estimated losses of about US$9 billion, with insured losses of about US$7 billion due to the greater share of more heavily insured storm losses.

Munich Re said that last year’s typhoon season was again, as in 2018, subject to the “El Niño Modoki” effect, a natural climate oscillation that causes variations in water temperatures in the tropical Pacific Ocean. The reinsurer explained that these conditions cause typhoons steer more frequently towards Japan.

Nevertheless, Munich Re said, the typhoon season in the northwest Pacific was close to the long-term average in terms of the number of storms.

“The typhoon season shows that we must consider short-term natural climate variations as well as long-term trends due to climate change,” said Ernst Rauch, chief climate and geoscientist at Munich Re, in a statement in the report.

“In particular, cyclones are becoming more frequently associated with extreme precipitation, as with Hagibis in Japan in 2019 and Hurricane Harvey in 2017 in the U.S. Recognizing these changes can form the basis for further preventive measures to reduce losses,” he added.

Climate Change

At several points in its report, Munich Re discussed the issue and effects of climate change.

“The severe cyclones in 2019 have highlighted the importance of knowledge about changes in risk,” said Torsten Jeworrek, member of the Board of Management at Munich Re. “Natural climate variations influence weather catastrophes from year to year. Longer-term climate change effects can already be felt and seen.”

As a result, he continued, buildings and infrastructure must be made more resistant in order to reverse the increasing trend in losses. “This will enable insurance to be more effective and support the remaining financial losses,” he affirmed.

Regarding the ongoing devastation caused by bushfires in Australia, the reinsurer said individual events cannot be directly attributed to climate change, although recent studies have shown that in the long term the environmental conditions for bushfires have become more favorable – especially in the south and east of Australia.

Also discussing California’s wildfire trends, the report noted that losses were lower in 2019 than the record losses seen in prior years, but there is still a “sharply rising long-term trend for forest area burned and wildfire losses in the U.S.”

A wet winter helped ameliorate summer drought conditions, Munich Re said. “There were still many fires, but they burned a much smaller area than the five-year average,” bringing overall losses of US$1.1 billion, of which about US$800 million were insured.

Climate change was a factor in the growing losses from hailstorms across the globe, indicated the reinsurer. “Recent scientific studies have shown that we can expect hailstorms to increase in many regions as a consequence of climate change,” said Rauch. “It is also clear in this case: Measures such as better early-warning systems and more resistant building materials are important in order to mitigate against long-term increases in losses.”

Additional findings from Munich Re’s natural catastrophe report include:

Global Numbers. There were 820 natural catastrophes in 2019, causing overall losses of US$150 billion, with insured losses of US$52 billion.
Hurricane Dorian. Dorian was the strongest hurricane of the Atlantic season, causing catastrophic damage in the Bahamas but largely sparing the U.S. mainland. Dorian caused overall losses of about US$5.6 billion, with only a small portion of these losses affecting the U.S. Insured losses were about US$4 billion.
Atlantic Hurricanes. The number of three major hurricanes (category 3–5) in the Atlantic in 2019 was close to the long-term average (2.7), but the number of named storms (18) significantly exceeded the average of 12. However, losses were relatively low, as the strongest storms remained over the ocean or missed the U.S. mainland.
U.S. Hurricanes. Due to the lack of severe hurricanes, the U.S. share of global natural catastrophe losses was lower than usual (31% of overall global losses compared with the long-term average of 35%). Overall losses in the U.S. during the 2019 hurricane season were US$3 billion, of which US$2 billion were insured.
Severe European Weather. Heatwaves and severe hailstorms combined to bring the greatest cause of losses in Europe. Overall losses from summer storms in Europe were US$2.5 billion (€2.2 billion), including insured losses of about US$900 million (€800 billion).
Human Cost. About 9,000 people lost their lives in natural catastrophes in 2019 compared with 15,000 in 2018, which “confirms the overall trend towards lower numbers of victims thanks to better prevention measures.” On average, over the past 30 years, about 52,000 people annually lose their lives in natural catastrophes, Munich Re said.
Cyclone Idai. The greatest humanitarian catastrophe of the year was Cyclone Idai, which hit Mozambique and neighboring countries in March, killing more than 1,000 people, while hundreds of thousands lost everything they had. Overall losses came to US$2.3 billion with almost nothing covered by insured. The losses in Mozambique correspond to about a tenth of its gross domestic product, which is an enormous impact on a very poor country, Munich Re said.