Economic growth, rising property values increase cost of natural catastrophe claims
Insured claims from natural catastrophes are increasing dramatically, says insurer Allianz. The average annual cost of insured claims from natural catastrophes has increased eight-fold since 1970 (up from some USD $5 billion in the 1970s and 1980s to over $40 billion in 2010). One reason behind the increase is economic growth.
In its recent risk briefing – the Allianz Risk Pulse: Focus Natural Catastrophes (PDF) – the company said that rising property values, population density and insurance penetration are increasing, often in high risk areas. The trend is compounded by the fast growth of some Asian economies in catastrophe-prone regions.
The Allianz analysts have also noted that, during the past decade, the earthquakes which caused the highest fatalities were not necessarily the strongest ones. For example, the 2010 quake in Haiti released 500 times less energy than the quake that hit Chile two months later – yet the Haitian quake wreaked much more havoc. The factors which determine the impact are complex and include building design and materials, severity of secondary earthquake effects like tsunamis or fires and lack of preparedness.
Proper risk management prior to an event and preparation for a possible natural disaster are identified as key factors in reducing the impact. Using their experience of risk management and claims investigations, insurers such as Allianz can advise their clients on how to analyze risks including natural catastrophes, how to prepare in advance and (for businesses) how to restore operations quickly after an event – a vital element in minimizing business interruption losses.
The insurance industry plays an important role when it comes to helping those affected by natural catastrophes, advising on preparedness and prevention and analyzing risk. Teams of claims regulators, risk managers, natural catastrophe experts and economic research specialists work hard to support clients and to understand natural catastrophes and their effects.
“Terrible events like major natural catastrophes illustrate the value and importance of insurance to society,” said Clement B. Booth, board member of Allianz SE in the Allianz Risk Pulse. “The most important thing is to help those affected unbureaucratically and quickly – and to have a lot of empathy.”
