Disparity Between Economic and Insured Loss Widens

Around 24 percent of global economic losses due to natural catastrophes during the first half of 2013 were covered by insurance, slightly below the 10-year (2003-2012) average of 28 percent, according to Aon Benfield Impact Forecasting.

In its 1H 2013 Global Natural Disaster Analysis, Aon Benfield says the larger disparity between the economic and insured loss is due to multiple significant catastrophe events occurring in areas where insurance penetration or specific peril coverage remained low.

The analysis shows that economic losses from global natural disasters during the first half of 2013 totaled $85 billion – around 15 percent lower than the 10-year average of $100 billion. Insured losses for the period reached $20 billion – some 20 percent below the 10-year average of $25 billion.

Roughly 50 percent of the insured losses resulting from natural disaster events were recorded in the United States, down from 83 percent in the first half of 2012.

In order of size the five largest economic loss events in the first half of 2013 were: the Central Europe floods during May/June ($22 billion); the China earthquake on April 20 ($14 billion); the Brazil drought ($8.3 billion); the U.S. severe weather outbreak from May 18-22 ($4.5 billion); and the China drought ($4.2 billion).

Meanwhile, the first half of 2013 comprised seven billion-dollar insured loss events, of which five were in the U.S.: the Central Europe floods during May/June (USD5.3bn); the U.S. severe weather outbreak of May 18-22 (USD2.5bn); the U.S. severe weather outbreak of March 18-20 (USD1.25bn); the U.S. severe weather outbreak of May 26-June 2 (USD1.20bn); the Australia floods during January (USD1.04bn); the Canada floods during June (USD1.0 billion); and a U.S. winter storm in early April (USD1.0bn).

*By the way, the latest edition of Cavalcade of Risk, a round-up of risk-related posts from around the blogosphere, is now live over at Insurance Coverage Law in Massachussetts. It includes a link to our recent post New York MTA in Storm Surge Catastrophe Bond First.