10 January 2014 Insurance

Flood controls work; now build more

Flood control measures saved Europe from significant losses after the region faced this year’s costliest catastrophe. But there are still lessons to be learned and more must be done in other parts of the world, according to Munich Re.

The costliest natural catastrophe of the year in terms of overall economic losses was the flooding in southern and eastern Germany and the neighbouring states at the beginning of June. Overall losses totalled $15.2 billion (€11.7billion), while insured losses came to $3 billion (€2.3billion).

Hamburg, which became a target of flooding following a storm surge which led to the water in the River Elbe rising to over 6.09 metres above normal as a result of Winter Storm Xaver, was spared of any major losses. The City invested €2 billion in flood protection measures after the flood of 1962, which caused 347 fatalities. Since then, the city has been spared of €20 billion of losses.

“The 2013 floods showed that flood control can work,” said Peter Höppe, head of geo risks research at Munich Re. “Nevertheless, it also demonstrated that flood control has to cover the whole course of a river and cannot just consist of dykes.

“Rivers need space to spread out when there are floods, so that those living downstream are not hit even harder when protective measures are taken in the upper reaches. This requires efforts comprising the whole catchment area of a river, which therefore often have to be internationally coordinated.”

Torsten Jeworrek, Munich Re Board member responsible for global reinsurance business added: “Several of the events of 2013 illustrated how well warnings and loss minimisation measures can restrict the impact of natural catastrophes. In the case of the most recent winter storms in Europe, for example, the losses remained comparatively low.”

However, Supertyphoon Haiyan, which tore across the southern Philippines on November 7, was probably the strongest recorded cyclone ever to make landfall. Over 6,000 people were killed in the storm, and millions were left homeless. The overall loss totalled some $10 billion, equivalent to around 5 percent of the Philippinesʼ annual economic output. Owing to the very low insurance penetration, the insured loss will probably only be in the mid three-digit million range.

“Events like those in the Philippines show the urgent need for more to be done in developing and emerging countries to protect people better,” said Jeworrek. “This includes more stable buildings and protection facilities, and insurance programmes – also with state backing – to provide those affected with financial assistance after a disaster.”

Meanwhile, the North Atlantic Hurricane season was very quiet. Not a single storm of hurricane strength reached the US mainland. Altogether, a total of 13 cyclones formed in the tropical North Atlantic, of which only two (Ingrid and Humberto) achieved hurricane force and those only in category one, the weakest rating for a hurricane.

Canada was hit by unusually heavy rainfall in the province of Alberta of up to 190 litres per square metre in one day coincided with late snowmelt. This led to record flooding on the rivers flowing through the provinceʼs capital of Calgary – the Bow River and Elbow River. The economic loss amounted to $5.7 billion, of which nearly $1.6 billion was insured, making it the costliest natural catastrophe in Canada ever.

The German hailstorms in July were the most significant event of 2013, totalling around $5.2 billion (€3.9 billion) of damage, of which $4.1 billion (€3.1 billion) was insured. The hailstorms in late July alone accounted for $ 4.8 billion (€3.6 billion) of the overall loss, and $3.7 billion (€2.8 billion) of the insured loss.

Globally, insured losses from natural catastrophes in 2013 amounted to around $31 billion, which remained below the average of the past ten years of $56 billion.

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