Storms cause $51bn in losses in 2018 season: Munich Re
The 2018 tropical cyclone season across the northern hemisphere has caused overall losses of around $51 billion, well below last year’s figure of $220 billion, but still substantially above the long-term average of $34 billion, according to Munich Re.
Overall losses from the year's tropical storms in the North Atlantic came to $31 billion, of which $14 billion was insured. Almost all of these losses were in the US. Hurricanes Michael and Florence accounted for the biggest portion of losses, with $16 billion and $14 billion respectively (insured $10 billion and $4 billion). With Hurricane Michael, which made landfall on the US mainland as the fourth-strongest storm on record with wind speeds of up to 250 km/h, the proportion of insured to non-insured losses reached 60 percent, due to the higher take-up of wind insurance coverage, according to Munich Re.
Before Michael, there were no historical observations of such a severe hurricane making landfall along the central Florida panhandle. Many older buildings that did not meet the latest building standards were destroyed by either wind or coastal surge flooding, Munich Re noted.
In contrast, the proportion of insured losses with hurricane Florence was just 40 percent because most of the damage in this storm was caused by flooding due to extreme rainfall. Flood risk is not normally covered under standard homeowners’ insurance policies in the US, with the result that there is low insurance penetration for flood damage. The National Flood Insurance Program (NFIP) is only available for participating communities, take-up rates are quite low, and the maximum amount insured is capped below the value of many homes.
At the same time, the year 2018 has shown high cyclone activity in the Northwest Pacific. The energy released by the storms over the entire season was approximately 20 percent above the long-term average. A total of 16 typhoons with hurricane-strength formed (long-term average to 28 November: 15.8), of which 9 (8.3) reached wind strengths in the highest categories (3–5).
“Munich Re’s experts are analysing the correlations involved in order to improve insurers’ risk management”, said Hermann Pohlchristoph, board member of Munich Re.
“Through our long- standing presence in Japan and deep regional expertise, we are committed to working closely with our local clients, to help them address the challenges posed by the situation.”
A total of seven storms hit or skirted the islands of Japan. Five of the storms made landfall or came very close to land with typhoon strength and brought with them torrential rainfall.
Overall losses for the storms totalled $12 billion, of which $8 billion was insured. Typhoon Jebi caused losses of $8.5 billion, of which $6 billion was insured, making it one of the most costly Japanese typhoons in history. In Japan, it was only the third year since 1980 that storm losses exceeded 2 per mille of GDP, which highlights the severity of this year’s storm activity, Munich Re noted.
The Philippines were hit by Super Typhoon Mangkhut (Ompong) with wind speeds of up to 270 km/h. Despite tens of thousands of people being evacuated, some 100 people lost their lives in this (highest) Category 5 tropical storm. Due to the low insurance density in the country, only a small fraction of the losses was insured. The lion’s share of the overall losses from Typhoon Mangkhut ($4.5 billion) was caused in Hong Kong and mainland China. Losses from typhoons throughout the Northwest Pacific totalled $17 billion, of which $9.5 billion is likely to be insured.
