Swiss Re sigma study details 2006 natural, man-made disasters

in its just released sigma study, “Natural catastrophes and man-made disasters in 2006”, Swiss Re notes that “losses due to natural catastrophes and man-made disasters were below the long-term trend in 2006.” Cat losses totaled around $48 billion, of which approximately $5.9 billion was covered by insurance.

Swiss Re also noted that “insurers have modified their catastrophe simulation models, where appropriate, to bring them into line with higher expected damage — especially in the light of the record loss years 2004/05 and an increasingly volatile climate.”

Although 2006 was a relatively benign year in economic terms, “natural catastrophes and man-made disasters claimed more than 31,000 human lives worldwide,” according to the report. There were 349 catastrophes. However, “unlike in the two previous years, natural catastrophes affected mainly developing countries where property values are low,” said Swiss Re, “resulting in comparatively light economic losses of $48 billion. Low insurance penetration in developing countries also meant that only one third of these economic losses in 2006 was actually covered by insurance.”

The $15.9 billion insured loss figure produced the “third-lowest losses of the past 20 years — only 1997 and 1988 were less expensive (after allowance for inflation).” The total for natural catastrophes was $11.8 billion and man-made disasters around $4 billion, mainly attributable to “the calm hurricane season in the U.S. and the absence of any highly damaging events in Europe.”

Swiss Re doesn’t see the 2006 results as a reversal of the trend towards higher losses over the past decades, which have been due “mainly to weather-related catastrophes.” The “increasing concentration of property values and urban encroachment into highly-exposed regions” has also raised loss figures.

The trend is also linked to climate change. “Going forward, the effects of global warming are also likely to aggravate the loss situation,” the report explained.

This is the first time the Swiss Re sigma report has included statistics from flood losses in the U.S. “The historical series as of 1970 have been revised accordingly,” said the report. As a result of this change, the insured loss of Hurricane Katrina was revised upward to $66 billion from $49 billion without National Flood Insurance Program.