Carriers are on the hook for $80bn for losses stemming from natural catastrophes in 2018, according to Munich Re.
The reinsurance giant said that insured losses were substantially above the inflation-adjusted average for the last 30 years of $41bn.
However, Munich Re said the cat bill (re)insurers would have to pick up in 2018 was well below the 2017 insured losses of $140bn.In 2017 carriers were hit with losses from three major hurricanes – Harvey, Imra and Maria – as well as wildfires in California towards the end of the year.
Economic losses for last year were $160bn overall. While Munich Re said that is above the inflation-adjusted average for the last 30 years of $140bn, it was more than half the $350bn of losses witnessed in 2017.
The Camp wildfire that ravaged the town of Paradise in California late last year was the most expensive insured catastrophe loss in 2018, with carriers on the hook for $12.5bn (see table).
The reinsurer said that the fire in early November – which killed 86 people – caused overall losses of $16.5bn, making it the costliest natural catastrophe of the year.
The Camp Fire more or less completely destroyed the small town of Paradise in the foothills of the Sierra Nevada approximately 140km north of Sacramento.
Drought and strong winds helped to fuel the fire, and hilly terrain and limited access routes made it more difficult to put the fire out.
Hurricane Michael dealt insurers a $10bn loss bill, while Typhoon Jebi – the costliest typhoon in Japan’s history – costing insurers $9bn.
Ernst Rauch, head of climate and geosciences at Munich Re said: “Our data shows that the losses from wildfires in California have risen dramatically in recent years. At the same time, we have experienced a significant increase in hot, dry summers, which has been a major factor in the formation of wildfires.
“Many scientists see a link between these developments and advancing climate change. This is compounded by man-made factors such as burgeoning settlements in areas close to forests at risk from wildfire,” Rauch added.
“The casualties and losses are immense, and measures to prevent fires and damage are vital. Insurers also need to take account of the rising losses in their risk management and pricing.”
Munich Re Board member Torsten Jeworrek said: “2018 saw several major natural catastrophes with high insured losses.
“These included the unusual phenomenon of severe tropical cyclones occurring both in the US and Japan while autumn wildfires devastated parts of California. Such massive wildfires appear to be occurring more frequently as a result of climate change.”
“Action is urgently needed on building codes and land use to help prevent losses. Given the greater frequency of unusual loss events and the possible links between them, insurers need to examine whether the events of 2018 were already on their models’ radar or whether they need to realign their risk management and underwriting strategies.”