Gore will be pissed. . . good thing he only reads what he wants to
Hurricanes hardly happened, so it's a good year for the insurers
By Caroline Muspratt
Last Updated: 12:18am GMT 22/12/2006
Fewer storms and natural disasters have made 2006 the least expensive year for insurers in almost a decade and the third-cheapest in the past 20 years.
Natural and man-made catastrophes have triggered total economic losses of about $40bn (£20bn) and cost property insurers $15bn this year, according to estimates from insurer Swiss Re's Sigma report. An estimated 30,000 people lost their lives in catastrophes including earthquakes, windstorms and shipping disasters.
"After years of record losses, property insurers appear to be getting off lightly in 2006," Swiss Re said. "Catastrophe losses of only $15bn will allow them to replenish their risk capital, depleted by record payments for hurricane damage in 2005 and 2004."
2006 has produced the third-lowest loss for insurers in the past 20 years, after 1997 and 1988, Swiss Re said, mainly due to the quiet US hurricane season this year. It said that Europe had also been spared expensive catastrophes but warned that the year "is by no means over".
Last year Swiss Re said that natural and man-made catastrophes caused economic losses of about $225bn in 2005 when Hurricane Katrina swept through the US. Insured losses amounted to $80bn.
Aurelia Zanetti, part of the Sigma team at Zurich that compiled the report, said: "2004 and 2005 were very active in North American hurricanes and risk capital was a bit depleted. 2006 was a relief for property insurers worldwide." The report also pointed out that expensive man-made disasters, such as aircraft crashes or large-scale fires, "have been conspicuous by their absence". However, the relatively benign year in 2006 does not mean insurers will see rates start to come down. 2007 is almost certain to be a year of greater hurricane activity, as the level of natural disasters this year has been thankfully, but unusually, low.
Mark Saunders, professor of climate prediction in the department of space and climate physics at University College London, said recently that 2006 ranked as the 22nd-quietest hurricane year since 1950 for Atlantic basin activity.
Forecasting group Tropical Storm Risk has predicted a return to high levels of hurricane activity in 2007. In fact, it said occurrences in the Atlantic basin and US landfall activity would be 60pc above the average for 1950-2006.
Rolf Tolle, franchise performance director at insurance market Lloyd's, said: "The first forecasts for 2007 indicate that it will be an above-average hurricane season. But the same forecasters told us that 2006 would be an above-active hurricane season and they were wrong." He said there was no way of knowing how 2007 would turn out, but on balance it was more likely that hurricane activity would be greater next year.
Insurers divide their business into two main classes: catastrophe-exposed and non-catastrophe-exposed. The two markets have their own pricing cycles and many insurers shift their focus depending on rates and market conditions.
Mr Tolle said: "It is a tale of two markets. US catastrophe-exposed business is still strong and in some cases rates are still increasing. But other business is flat or weakening."
He said he did not see a significant deterioration in catastrophe insurance rates, adding: "The losses that have been incurred are so substantial that it will take time to recuperate."
Lloyd's reported a loss of £103m for 2005, its first loss since 2001, compared with a profit of £1.3bn the year before. It said that 2005 had cost the insurance industry far more than the September 11 terror attacks in 2001.
A spokesman for specialist insurer Catlin, which has just taken over rival Wellington, said: "Rates increased at the end of last year for catastrophe-exposed business, but there were even bigger rate increases in the summer months." He said that insurers and reinsurers renewing their policies this January "will see further rate increases even though 2006 has been a remarkably catastrophe-free year. 2005 was so bad that catastrophe rates must rise further."
Charles Philipps, chief executive of Lloyd's insurer Amlin, said: "You've got to look over a period of years. Just because there hasn't been a major catastrophe in the past 12 months doesn't mean the probability of there being an event has changed."
Many companies including Amlin have reduced their exposure to catastrophe-related insurance, which has both advantages and disadvantages.
If hurricanes do hit, the insurers stand to take lower losses than in 2005 but if the weather is benign, the companies will not profit as much from a potentially lucrative revenue stream. Even so, it appears that insurers are becoming more cautious and in many cases are turning their attention to other lines of business.
As a result, in non-catastrophe-exposed lines, such as UK property and motor insurance, rates are under pressure from increasing competition. Even so, prices are still good on the back of several years of rate increases.
US property insurance rates are particularly expensive to reflect property prices.
Infrastructure in areas such as California and Florida is highly developed and more likely to be insured and it will cost more to repair any damage.
Typhoons and earthquakes have mainly hit newly industrialised countries this year, meaning insured losses were relatively low, according to Swiss Re's Sigma report.
Swiss Re recorded 140 natural disasters and more than 200 man-made catastrophes this year and said the most expensive was a US tornado with winds up to
240km/h in April, which caused insured losses of $1.72bn. Other tornadoes in the US in the same month cost insurers $1.28bn and Typhoon Shanshan in Japan cost $1.03bn in September.
Earthquakes caused the most fatalities, with 5,778 victims either dead or missing in Indonesia after an earthquake destroyed the city of Bantul in May. Typhoon Durian, flash rains and a mudslide claimed 1,350 victims in the Philippines in November while the cold spell and power shortages in eastern Europe, beginning in January, had 1,333 victims.
Other major accidents included a ferry sinking off the Egyptian coast which cost 1,026 lives and a passenger train colliding with a goods train in North Korea with 1,000 victims.
By Caroline Muspratt
Last Updated: 12:18am GMT 22/12/2006
Fewer storms and natural disasters have made 2006 the least expensive year for insurers in almost a decade and the third-cheapest in the past 20 years.
Natural and man-made catastrophes have triggered total economic losses of about $40bn (£20bn) and cost property insurers $15bn this year, according to estimates from insurer Swiss Re's Sigma report. An estimated 30,000 people lost their lives in catastrophes including earthquakes, windstorms and shipping disasters.
"After years of record losses, property insurers appear to be getting off lightly in 2006," Swiss Re said. "Catastrophe losses of only $15bn will allow them to replenish their risk capital, depleted by record payments for hurricane damage in 2005 and 2004."
2006 has produced the third-lowest loss for insurers in the past 20 years, after 1997 and 1988, Swiss Re said, mainly due to the quiet US hurricane season this year. It said that Europe had also been spared expensive catastrophes but warned that the year "is by no means over".
Last year Swiss Re said that natural and man-made catastrophes caused economic losses of about $225bn in 2005 when Hurricane Katrina swept through the US. Insured losses amounted to $80bn.
Aurelia Zanetti, part of the Sigma team at Zurich that compiled the report, said: "2004 and 2005 were very active in North American hurricanes and risk capital was a bit depleted. 2006 was a relief for property insurers worldwide." The report also pointed out that expensive man-made disasters, such as aircraft crashes or large-scale fires, "have been conspicuous by their absence". However, the relatively benign year in 2006 does not mean insurers will see rates start to come down. 2007 is almost certain to be a year of greater hurricane activity, as the level of natural disasters this year has been thankfully, but unusually, low.
Mark Saunders, professor of climate prediction in the department of space and climate physics at University College London, said recently that 2006 ranked as the 22nd-quietest hurricane year since 1950 for Atlantic basin activity.
Forecasting group Tropical Storm Risk has predicted a return to high levels of hurricane activity in 2007. In fact, it said occurrences in the Atlantic basin and US landfall activity would be 60pc above the average for 1950-2006.
Rolf Tolle, franchise performance director at insurance market Lloyd's, said: "The first forecasts for 2007 indicate that it will be an above-average hurricane season. But the same forecasters told us that 2006 would be an above-active hurricane season and they were wrong." He said there was no way of knowing how 2007 would turn out, but on balance it was more likely that hurricane activity would be greater next year.
Insurers divide their business into two main classes: catastrophe-exposed and non-catastrophe-exposed. The two markets have their own pricing cycles and many insurers shift their focus depending on rates and market conditions.
Mr Tolle said: "It is a tale of two markets. US catastrophe-exposed business is still strong and in some cases rates are still increasing. But other business is flat or weakening."
He said he did not see a significant deterioration in catastrophe insurance rates, adding: "The losses that have been incurred are so substantial that it will take time to recuperate."
Lloyd's reported a loss of £103m for 2005, its first loss since 2001, compared with a profit of £1.3bn the year before. It said that 2005 had cost the insurance industry far more than the September 11 terror attacks in 2001.
A spokesman for specialist insurer Catlin, which has just taken over rival Wellington, said: "Rates increased at the end of last year for catastrophe-exposed business, but there were even bigger rate increases in the summer months." He said that insurers and reinsurers renewing their policies this January "will see further rate increases even though 2006 has been a remarkably catastrophe-free year. 2005 was so bad that catastrophe rates must rise further."
Charles Philipps, chief executive of Lloyd's insurer Amlin, said: "You've got to look over a period of years. Just because there hasn't been a major catastrophe in the past 12 months doesn't mean the probability of there being an event has changed."
Many companies including Amlin have reduced their exposure to catastrophe-related insurance, which has both advantages and disadvantages.
If hurricanes do hit, the insurers stand to take lower losses than in 2005 but if the weather is benign, the companies will not profit as much from a potentially lucrative revenue stream. Even so, it appears that insurers are becoming more cautious and in many cases are turning their attention to other lines of business.
As a result, in non-catastrophe-exposed lines, such as UK property and motor insurance, rates are under pressure from increasing competition. Even so, prices are still good on the back of several years of rate increases.
US property insurance rates are particularly expensive to reflect property prices.
Infrastructure in areas such as California and Florida is highly developed and more likely to be insured and it will cost more to repair any damage.
Typhoons and earthquakes have mainly hit newly industrialised countries this year, meaning insured losses were relatively low, according to Swiss Re's Sigma report.
Swiss Re recorded 140 natural disasters and more than 200 man-made catastrophes this year and said the most expensive was a US tornado with winds up to
240km/h in April, which caused insured losses of $1.72bn. Other tornadoes in the US in the same month cost insurers $1.28bn and Typhoon Shanshan in Japan cost $1.03bn in September.
Earthquakes caused the most fatalities, with 5,778 victims either dead or missing in Indonesia after an earthquake destroyed the city of Bantul in May. Typhoon Durian, flash rains and a mudslide claimed 1,350 victims in the Philippines in November while the cold spell and power shortages in eastern Europe, beginning in January, had 1,333 victims.
Other major accidents included a ferry sinking off the Egyptian coast which cost 1,026 lives and a passenger train colliding with a goods train in North Korea with 1,000 victims.
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