Insured losses reach record high in 2017
January 21, 2018
Keywords: Asset Management
One of the warmest years on record was also a period in which natural disasters spanned the globe, and insurers will be paying out a substantial amount to make affected residents whole, a newly released report suggests.
Worldwide, the string of catastrophes that took place in 2017 will set property insurers back approximately $330 billion, according to recent estimates from reinsurer Munich Re. The largest projected insured loss total on record, much of the damage stemmed from above normal tropical storm activity in the U.S., as last year was the first since 2005 in which a major hurricane made landfall. Storms with major classification are Category 3 and higher, producing sustained wind gusts of at least 111 miles per hour.
Hurricane Harvey set the stage
Although 2017 didn't suffer from a lack of activity in the damaging weather department, the 12-month period will likely be remembered for the triumvirate of hurricanes that slammed into the U.S. and its territories in late summer. The first was Hurricane Harvey, which mainly impacted Houston and doused Texas' largest city in excess of 50 inches of rainfall, leading to record-setting flooding. A few weeks later, in September, Hurricane Irma threatened Florida, forcing millions of residents to clear out of the Sunshine State, as directed by emergency officials. Hurricane Maria largely spared the U.S. mainland, but made a lasting impact in Puerto Rico, evidenced by sustained property damage and power outages for virtually the entire island in the immediate aftermath and several weeks later. Three months after the Category 4 storm struck, 40 percent of residents still do not have electricity, Rep. Eddie Charbonier of San Juan told the Orlando Sentinel.
For these three hurricanes alone, property and casualty insurer spending will exceed $100 billion, according to Munich Re's estimates.
Torsten Jeworrek, board member for Munich Re's global reinsurance division, noted insurers are there to defray the cost of repair and recovery.
"This year's extreme natural catastrophes show how important insurance is in absorbing financial losses in the wake of such disasters," Jeworrek explained in a press release.
He further stated that in his belief, 2017 was a forewarning of what's to come, noting that storms in recent years have strengthened and become more extreme.
2017 in top five warmest years for globe
Much of this may be due to record warmth, as climatic activity thrives when there's added moisture in the atmosphere. According to the National Oceanic and Atmospheric Administration, 2017 was the third-warmest year since recordkeeping began 138 years ago. On average, the global temperature was roughly 1.5 degrees Fahrenheit above 57 degrees Fahrenheit in 2017, which was the Earth's typical temperature during the 20th century. This means that of the hottest years ever to be recorded, six have transpired since 2010.
Of course, not all losses are insured losses. Nevertheless, those that are covered are expected to set an all-time high. At $135 billion, that's three times higher than the $49 billion average, the Munich Re report said.
Tony Kuczinski, Munich Re president and CEO, noted that even though U.S. residents and business owners have many providers to choose from, property owners frequently go without it.
"There continues to be a substantial insurance gap, even in a highly developed market like the United States where, for example, the vast majority of home and small-business owners do not purchase flood insurance," Kuczinski said.
Indeed, less than 15 percent of Americans have flood insurance protection, according to polling conducted by the Insurance Information Institute.
Mother Nature didn't pull punches in much of the rest of the world either in 2017. Harvest proved to be problematic for farmers in parts of Europe, as colder-than-normal temperatures led to reduced production. Some reports indicate harvests were half of what they typically are in terms of volume, Munich Re reported. Meanwhile, in Asia, monsoon season displaced thousands of area residents, with people in Nepal experiencing the brunt of the impact. Insured losses totaled $3 billion.
Every year brings with it changes in weather patterns that make each successive 12-month period unique. At Miles Capital, we're aware of this fact and what role insurers play in covering policyholders' bases. We offer insurers customized investment and asset management opportunities that can meet insurers' needs and capital goals. This is done through our patented Objectives-Based Asset Allocation system. Click here to learn more.
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