Ms Claire Kennedy of Impact Forecasting gives an overview of the 2014 natural disaster losses that hit Asia Pacific, which suffered the worst flood of the year and more than half the catastrophes recorded globally.
Globally, natural disasters1 in 2014 combined to cause economic losses of US$132 billion; 37% below the most recent 10-year average (2004-2013) of $211 billion. Global insured losses were also below the long-term average ($63 billion) as insurers paid out $39 billion in claims.
Low level of insurance penetrations in Asia Pacific
In the Asia-Pacific region (APAC), economic losses from natural disasters totalled $75 billion; 18% below the long-term average of $91 billion. Economic losses in APAC accounted for 57% of the global total (Figure 1). Insured losses in the region reached $11 billion last year, which was close to the decadal mean but only comprised 28% of the global total (Figure 2).
This large disparity between economic and insured losses is an enduring story in the region and highlights the low levels of insurance penetration, particularly in territories that are highly vulnerable to significant natural disasters.
Most of Nat CAT events happened in Asia Pacific
At least 258 separate natural disaster events were registered worldwide last year; more than half of which occurred in APAC (130). APAC also endured the most billion-dollar economic loss events with 12 separate incidents crossing the $1.0 billion threshold in 2014.
Most of these events occurred in China, and included: a severe weather event in May; drought that affected northern parts of the country throughout the summer; Super Typhoon Rammasun’s landfall in July; a magnitude-6.1 earthquake that hit Yunnan in August; Typhoon Kalmaegi which struck in September; and flood events in July and September.
Perhaps more significantly, the two most economically damaging events of the year both impacted India.
The first was a massive flood event in September that inundated vast areas of northern India and Pakistan, in the region known as Kashmir. Given the immense scale of the floods and the difficulty of collecting accurate data in the region, there remains some doubt regarding the total economic loss.
At present, combined estimates from the Indian and Pakistani governments suggest economic damages of up to $18 billion. This is subject to change given uncertainty surrounding the quality of available data.
Notably, this was the fifth consecutive year that Pakistan endured a billion-dollar-plus economic loss flood event. The second costliest economic loss event of the year was the mid-October landfall of Cyclone Hudhud in Andhra Pradesh. The Category 4 cyclone came ashore with wind speeds of 215 kph (130 mph) and caused significant damage in the port city of Visakhapatnam. Initial estimates from the Indian government suggested economic damages of up to $11 billion, though this total was also subject to change.
The remainder of APAC’s billion-dollar-plus economic loss events included the February snowstorms that impacted several prefectures in Japan, and two weather events in Queensland, Australia: Cyclone Ita’s April landfall and a severe November hailstorm that affected the greater Brisbane metropolitan area.
Japan and Australia registered losses above $2 bln
From an insured loss perspective, APAC only registered two billion-dollar-plus events. This further highlights the discrepancy between economic and insured losses in the region. Perhaps unsurprisingly, these events occurred in Japan and Australia – two territories with higher than average insurance penetration rates in the region.
Japan’s February snowstorms minimally cost the insurance industry $2.5 billion and the total is still growing. It represented Japan’s fourth costliest insured loss event ever following the 2011 Tohoku earthquake and tsunami, 1991’s Typhoon Mireille, and the Kobe earthquake (1995). Brisbane’s November hailstorm triggered a spate of insurance claims that quickly added up to $1.0 billion.
Human fatalities down in 2014
In terms of human fatalities, approximately 8,000 deaths were reported from natural disaster events last year. This was 58% lower than the number registered in 2013 (~19,000) and an even more substantial 89% lower than the 10-year average (~76,000).
It should be noted however, that four significant events (the 2004 Indian Ocean earthquake and tsunami; 2008’s earthquake in China; Cyclone Nargis’ landfall in Myanmar (2008); and the Haiti earthquake in 2010) have skewed this average.
In 2014, each of the top 10 human fatality events occurred in APAC, emphasising the region’s vulnerability to natural disaster perils. The deadliest event struck Afghanistan, where excessive spring rainfall triggered flash floods and landslides across 10 provinces that left approximately 2,600 people dead. Even now, there is still some uncertainty in this figure given the vast extent of the floods.
Flood is the deadliest peril of the year
Five more of the top 10 events were flood-related and impacted different parts of India, Nepal, and Pakistan. Given these events, it was no surprise that flood was the deadliest peril of the year, comprising 73% of human fatalities worldwide.
Breaking down the losses by peril, we find that global economic losses were driven by flood, severe weather (thunderstorm), and tropical cyclone perils. An impressive 72% of all economic losses were attributed to these three perils.
In APAC, they were driven by flood and tropical cyclone which combined to account for 70% of the region’s losses. Economic losses from the Kashmir floods and Cyclone Hudhud accounted for 24% and 14% of the total losses in APAC respectively.
Global insured losses were driven by severe weather, winter weather, and flood perils, which accounted for 80% of the total. In APAC, the top three insured loss perils were winter weather, tropical cyclone, and flood, which accounted for 77% of the total. Predictably, despite accounting for such a large proportion of the region’s economic losses, the Kashmir floods and Cyclone Hudhud only accounted for 12% (combined) of APAC’s insured losses. Japan’s February snowstorms accounted for one-quarter of insurance payouts in the region.
CAT models and alerts for Asia
Over the past decade, economic losses from natural disasters in the Asia-Pacific region have increased at a rate of 10.2% while insured losses have shown an increase of 13.9%. The faster rate of insured loss growth is unsurprising as insurance penetration has expanded across several emerging markets in the region.
Impact Forecasting has developed a suite of models that help analyse the financial implications that natural disaster events may have on our clients’ portfolios. The models are critical to helping our clients achieve a greater understanding of their risks.
For the Asia-Pacific region, Impact Forecasting has a number of probabilistic models and Realistic Disaster Scenarios (RDS) in place, including: an Asian Typhoon Model that covers 10 countries; earthquake models for Japan, Pakistan, Singapore, and Thailand; and flood models for China, Thailand, and Vietnam .
In addition to model development, Impact Forecasting also provides real-time information on natural disasters through CAT Alerts, Weekly and Monthly Cat Recaps, and the Annual Global Climate and Catastrophe Report. The intention of these reports is to help clients and colleagues by providing detailed real-time analysis of global disaster events that explain the science, location, historical context, and the latest financial implications to the industry. There is also a wealth of information available on the Catastrophe Insight website including the most up-to-date information on disaster losses, top-ten lists, historical catastrophe and climatological data, and archived cat reports.
Ms Claire Kennedy is Senior Analyst (Meteorologist) at Impact Forecasting.
Impact Forecasting is the catastrophe modelling development centre of Aon Benfield. In addition to model development, Impact Forecasting also provides real-time information on natural disasters through Cat Alerts, Weekly and Monthly Cat Recaps, and the Annual Global Climate and Catastrophe Report. January 2015 marked the publication of the 10th Annual Global Climate and Catastrophe Report, from which the key findings are summarised here for the Asia-Pacific region. The full report is available to view at http://thoughtleadership.aonbenfield.com/Documents/20150113_ab_if_annual_climate_catastrophe_report.pdf
Aon Benfield is the 2014 winner for Reinsurance Broker of the Year at the 18th Asia Insurance Industry Awards.