Munich Re Releases 2003 Catastrophe Study

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Munich Re has released its 2003 study of natural catastrophes, which concludes that “after three years of relative calm, no fewer than five great natural catastrophes(based on U.N. criteria) occurred in 2003.”

Parts of the study were released last November in conjunction with an international conference on climate change held in Milan. The study cited the five following serious natural catastrophes: tornadoes/severe weather events in the United States (May), earthquake in Algeria (May), heat wave/forest fires in Europe (July to August), heat wave/drought/forest fires in the United States (October to November), and the earthquake in Iran (December).

“Altogether, the approx. 700 natural hazard events recorded claimed more than 75,000 lives – almost seven times as many as in the previous year,” said the bulletin. “This high number of deaths is largely due to the five natural catastrophes mentioned above. What is more, they alone account for about a third of both economic and insured losses.”

A full copy of the study, “TOPICS geo – Annual Review of Natural Catastrophes 2003,” may be accessed on the reinsurer’s Web site at: http://www.munichre.com. It analyses in detail the natural hazard events of the past year. The study concluded that “again it was windstorms, floods, and severe weather events that had the greatest impact on the insurers’ overall claims balance.” Insured losses increased to about $16 billion, compared to $11.5 billion in 2002, while economic losses exceeded $65 million.

Munich Re again stressed, as it has often said in the past, that the “intensification of weather extremes and the resulting increase in loss potentials present new challenges, not least for insurers.” Stefan Heyd, the Board member responsible for corporate underwriting and global clients noted: “Premiums for insurance protection against natural hazards will increase, in line with the growing risk. Substantial deductibles and clear-cut limits of indemnity will also be required.”

Munich Re’s study also focused on the increasing perils caused by severe summer heat waves. “As the summer of 2003 showed, heat waves leave clear marks on the economy: cancellations in the inland cargo transportation sector (due to low water); reduced output from power plants (due to insufficient cooling water); losses in agriculture and forestry (cf. p.
20ff. in the study).” In France alone more than 15,000 people, mostly elderly, died from causes related directly to the soaring temperatures.

“More frequent heat waves will cause new substantial loss potentials and increase the demand for corresponding insurance protection (e.g. for crop losses or loss of earnings due to low water),” the announcement continued. “The insurance industry must prepare itself for a deterioration in the risk situation. Climate researchers believe that given an average increase in temperature of just 2ºC [approximately 3.3 F°], as is to be expected in central Europe by the middle of the century, extreme heat and heavy rain will occur much more frequently than has been the case up to now. Contrary forecasts, sometimes based on the premise of


the Gulf Stream collapsing, are considered by climatologists to be speculative and not very probable”.

The study also examined the toll in human lives from heat related causes and found a direct correlation. For example it found that “in New York and Shanghai about three times as many people die on extremely hot days than on normal warm days. The study also refers to an investigation into the connections between the number of road accidents and various weather parameters: there are generally about 20% more road accidents on hot days than on cool days”.