Munich Re: Sandy Tops 2012 Disasters

A series of severe weather-related catastrophes led to higher-than-normal losses in the United States last year.

The world’s largest reinsurer Munich Re took a close look at these catastrophes in its “2012 Natural Catastrophe Year in Review,” published on Jan. 3.

In the U.S., natural disasters led to a staggering $58 billion in insured losses last year. That’s far above the 2000-to-2011 average loss of $27 billion.

In comparison, in 2011, catastrophes led to $33.64 billion in insured losses in the U.S., according to data from ISO’s Property Claim Services.

Last year’s $58 billion figure also makes 2012 the second-costliest year in the U.S. in recent times – right behind 2005’s $73.4 billion U.S. insured losses.

Last year, the costliest loss event in the entire world was Superstorm Sandy. Munich Re estimates that Sandy alone accounted for $50 billion in overall losses, while the insured losses are expected to be around $25 billion, pegging the figure at the high end of major CAT modeling firms’ estimates.

The second major loss event of 2012 was the summer-long drought in the U.S. that plagued the Corn Belt in the Midwest and surrounding states, where most of the U.S. main agricultural crops are grown.

Munich Re noted that only in the Dust Bowl years, from 1934-1936, had yields been decimated by a worse drought.

Nearly half of the U.S.’s arable acreage was hit in 2012 and the overall agricultural crop losses in 2012 totaled around $20 billion, of which $15 billion to $17 billion was covered by the public-private multi-peril crop insurance program. It was the biggest loss in U.S. agricultural insurance history, the reinsurer noted.

What’s more, Munich Re cautioned that these are the types of weather-related disasters that the U.S. should expect to see more of in coming decades.

“These two catastrophes clearly demonstrate the type of events we can expect to contend with more often in the future,” said Prof. Peter Höppe, head of Munich Re’s geo risks research.

He said that while it’s not possible to attribute individual events to climate change, numerous studies are assuming a rise in summer drought periods in North America in the future and an increasing probability of severe cyclones relatively far north along the U.S. East Coast in the long term. Further, Munich Re said, the rise in sea level caused by climate change will increase the risk of storm surge.

But there are ways to help mitigate losses, Prof. Höppe advised. He said adopting loss-prevention efforts would take on a greater significance in coming years.

With no apparent prospect of progress in international climate negotiations like those held recently in Doha, adaptation to such hazards using suitable protective measures is “absolutely essential,” the professor said. Munich Re’s report points out that it would certainly be possible to better protect a major coastal city like New York from the effects of storm surges.