US risk modeller predicts $110bn in Nat CAT losses for 2020
Source: Middle East Insurance Review | Feb 2020
Recent reinsurance renewals were difficult for some – apparently some entities alleged no indication for improvement this year. However, US-based risk modelling and forecasting company AbsoluteClimo expects improvement with below normal risk direction for 2020, with global total losses most likely to meet or exceed $110bn and a probability range from $80bn to $164bn – notably better than 2017, 2018 and 2019.
The company also accurately predicted 2019 global Nat CAT losses at the beginning of last year, a forecast of $153bn. This was confirmed by Munich Re in a report stating that “natural catastrophes cause overall losses of $150bn, with insured losses of about $52bn – in line with long-term average”.
AbsoluteClimo also announced an extension of their climate risk prediction horizons to five years – from three years – including predictive forward risk assessment of financial losses and casualties from major earthquakes and volcanic eruptions worldwide.
Tropical cyclones dominate 2019 Nat CATs
Munich Re’s report noted that severe typhoons in Japan, including Hagibis and Faxai, caused last year’s biggest losses. This was the second year in a row that the nation was hit by record losses due to tropical cyclones.
Nat CATs numbering 820 caused overall losses of $150bn, which is broadly in line with the inflation-adjusted average of the past 30 years. A smaller portion of losses was insured compared with 2018 – about $52bn. This was due, among other things, to the high share of flood losses, which are often not insured to the same extent as wind damage in most industrial countries.
Munich Re board of management member Torsten Jeworrek said, “The severe cyclones in 2019 have highlighted the importance of knowledge about changes in risk. Natural climate variations influence weather catastrophes from year to year. Longer-term climate change effects can already be felt and seen. Buildings and infrastructure must be made more resistant in order to reverse the increasing trend in losses. This will enable insurance to be more effective and support the remaining financial losses.” M