3 April 2013 Insurance

2012 cat losses illustrate value of insurance

Nine of the ten most expensive insured loss events globally happened in the US in 2012 while the high insurance penetration in North America meant that $65 billion, over half of the $119 billion in economic losses in the region, were covered by insurance.

That was the main finding of the latest report by Swiss Re into natural catastrophe activity and losses. The company said the statistics do much to illustrate the importance of insurance to mature economies.

"The severe weather-related events in the US provided a reminder of the value of insurance and the vital role it plays in helping individuals, communities and businesses to recover from the devastating effects of catastrophes,” said Kurt Karl, Swiss Re's chief economist. “However, large parts of the globe that are prone to weather extremes were not able to rely on financial relief due to low insurance penetration."

Hurricane Sandy was the most expensive event for the year both in terms of economic and insured losses. The Hurricane caused an estimated total of $70 billion in economic losses, making it the second most damaging hurricane on record after Hurricane Katrina in

2005. Insured losses were approximately $35 billion, out of which $20 to 25 billion were covered by the private insurance market.

The remaining insured losses were incurred by the National Flood Insurance Program. Losses stemmed from the largest ever wind span recorded for a North Atlantic hurricane, and from the ensuing massive storm surge that caused damaging flooding in a densely populated area on the East Coast of the US.

Elsewhere, a rare and relatively weak series of earthquake shocks in the north of

Italy caused insured losses in excess of $1.6 billion, the highest ever recorded in the country. The total economic loss for these earthquakes was $16 billion.

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