1999 second most expensive year in history of insurance

In the latest edition of its publication "sigma", the Swiss Reinsurance Company in Zurich says acts of nature and man-made disasters claimed more than 105,000 lives in 1999.

This content was published on March 7, 2000 - 16:42

In the latest edition of its publication "sigma", the Swiss Reinsurance Company in Zurich says acts of nature and man-made disasters claimed more than 105,000 lives in 1999. Total losses are estimated at US$100 billion, without
indirect economic losses.

The annual study says that natural catastrophes were responsible for more than 90 per cent of the victims. The landslides in Venezuela (pictured) alone caused around 50,000 fatalities, the Izmit (Turkey) earthquake 20,000 and the tropical cyclone in Orissa (India) 15,000. Total damages were the highest since 1995, the year of the Kobe earthquake in Japan.

"sigma" reports that due to its devastating storms and earthquakes, 1999 had far-reaching effects on both insurers and reinsurers. With a loss burden of US$28.6 billion, 1999 was statistically the second most expensive year ever for reinsurers after 1992, the year of Hurricane Andrew. It adds that the trend towards high losses that had become apparent since 1989 was continuing.

Topping the list of the losses arising from natural catastrophes is December's Hurricane Lothar in Europe which caused insured losses of US$4.5 billion, while Storm Martin accounted for US$2.2 billion losses.

"Despite the high loss burden, the damage cannot be seen as a hundred-year event, since storm damage similar to that caused by Lothar is to be expected in Europe around every ten years, and damage similar to Martin every two to three years," the study comments.

Man-made catastrophes contributed US$4.2 billion to insurance industry losses, of which half was accounted for by industrial fires.

Space insurance also had a bad year with six satellite losses, or US$760 million in claims.

In aviation insurance, "sigma" registered 14 crashes with 660 fatalities and eight damaged planes on the ground, and claims totalling US$600 million.

Two big tunnel fires in Europe - in the Mont Blanc and the Tauern Tunnel - caused 51
fatalities, extensive property damage and renewed debate on security in road tunnels.

Examining more closely the series of earthquakes in 1999, "sigma" reports that there was "no more activity than the long-term average. From a global standpoint, neither the number, magnitude nor rapid succession of the tremours was unusual."

"What is singularly unusual about 1999's earthquakes is that they all hit densely populated areas within a very short time span. This accumulation of earthquakes is purely random, however," the study finds.

"sigma" says that the randomness of a loss event is a precondition for its insurability. But it says that conclusions being drawn from seismic stress research are not bringing the insurability of earthquake-prone areas into question.

"In areas with an increased probability of earthquake activity, the insurance industry will have to adjust its risk assessments appropriately and pass on the increased risk in the form of higher premiums," it says.

However, it adds that the rise is likely to be on an affordable scale, so that earthquake insurance will continue to be a "cost-efficient risk transfer".

By Robert Brookes

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