Market News

 January 05, 2016
Insurers paid out $27bn for natural disaster claims in 2015

 Around $27bn (£18bn) was paid out by insurers for natural disaster claims last year, with weather causing 94% of incidents, according to data from reinsurer Munich Re.

While the climate phenomenon known as El Niño reduced the development of hurricanes in the north Atlantic, storms and floods still caused billions of dollars worth of damage in Europe and North America, the world's largest reinsurer said in an annual review.

Munich Re said floods in the UK and Scandinavia caused by Storm Desmond last month may cause about €700m (£515m) in claims. It added that flooding from Storm Eva may cause overall damage of more than €1bn. Climate change may have played a role in the floods, according to the insurer.

Two tornadoes and flooding also hit the US last month but Munich Re said damage estimates were not yet available.

The insurance industry lobbied governments to take action to curb climate change in the run-up to the UN climate summit in Paris last year. It cited rising payouts in heavily insured rich country markets and a lack of affordable insurance in developing countries, where it is most needed.

"The proportion of insured losses for catastrophes in developing and emerging countries remains very low," said Torsten Jeworrek, a Munich Re board member.

"The insurance industry is exploring new avenues to close this gap in cover and thus to help people better cope with material losses after a catastrophe," Jeworrek added.

Insurers and reinsurers may get a push from an international effort unveiled by the Bank of England governor, Mark Carney, to develop company disclosures so that investors can assess companies' physical, liability and other risks from climate change.

The $27bn in insured damage last year was lower than the $31bn registered in 2014 and also below the 10-year average of $56bn, Munich Re said.

Overall damage, including that not covered by insurance, was $90bn last year, the lowest level since 2009.

In total, 23,000 people were killed in 2015, including many in the Nepal earthquake in April, compared with 7,700 the previous year, but was well below the 10-year average of 68,000.

Lower claims payouts boost insurance industry profit but the downside for reinsurers is that their insurance company clients often then demand lower prices for reinsurers' backing.

Munich Re is due to report its own results on 4 February.