October 5th, 2009

Impact and Implications of Swiss Hailstorms in July 2009: Insured Losses for July 2009 Hailstorms

Posted at 11:59 AM ET

For the purposes of this report, Guy Carpenter spoke to the Intercantonal Reinsurance Union (IRV), a body that represents all the cantonal insurers, and the ES-Pool, which represents 15 private insurers in Switzerland. The responses we received suggest cantonal and private insurers are likely to payout 150,000 claims totalling more than CHF733 million. Table 3 shows how the overall insured loss is split between cantonal and private insurers and line of business.

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The line of business breakdown shows motor losses account for the bulk of the claims. Some 90,000 claims totalling around CHF400 million were made to private insurers for motor-related damage. Most Swiss insurers cover Motor Own Damage with Cat XL programmes, and our findings suggest the vast majority of these were triggered, some with a total loss.

Property damage was also substantial with losses reaching more than CHF276 million from 50,000 claims. Cantonal insurers covered the bulk of the property claims, with losses of CHF250 million in the cantons of Bern, Fribourg, Lucerne and Vaud. Our figures suggest the average property loss was CHF5,550 for each building. Although an Elemental Pool exists in Switzerland to cover natural hazard losses, it seems private insurers will have to absorb the cost of the July hailstorms as the pool is unlikely to be triggered in 2009.1

By the very nature of the hail peril, property damage in the main is limited to the exterior of the building, but for this event substantial claims were also made for contents, caused by damaged awnings for example. In fact, some of the key reasons for the unexpectedly high property losses seem to be new elements with high loss sensitivities such as blinds, shutters, awnings and solar panels (see Figure 11). Some estimates indicate that these elements made up 50 percent of all losses, and the IRV has consequently sanctioned a study to ascertain why this happened.2

Insurers are also closely assessing crop losses after they were recently revised upwards. Insured loss in the agriculture sector are now expected to be CHF45 million, up from the original estimate of CHF35 million, according to Schweizer Hagel.

In terms of geography, the figures show the western cantons of Bern, Fribourg and Vaud suffered the highest insured losses. Buildings insurance cover in all three of these cantons is provided by cantonal insurers, and this is reflected in the high property losses that are allocated to the IRV in the table above.

The high insured loss from the hailstorms is expected to have a substantial influence on the (re)insurance renewal process for 2010 in Switzerland in the form of increased retentions, larger hail capacities and higher prices.

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  1. The Elemental Pool has an attachment point of CHF450 million, and due to the relatively low nat cat losses of 2009 in Switzerland (other than the July hail loss), the pool is unlikely to be triggered this year.
  2. The study is due to be released later this year.

Guy Carpenter’s Instrat® department provides CAT-i reports for major natural catastrophes worldwide. These reports cover catastrophes including worldwide tropical cyclones, earthquakes, major UK and European floods and any other natural event that is likely to incur a significant loss to the (re)insurance industry. Please email CAT.i@guycarp.com if you wish to be added to the free email distribution list.

Instrat also provides RISK-i reports for major technological or man-made events worldwide. These reports cover risks to property, transport and life including explosions, fires, crashes, engineering disasters and terrorist attacks that are likely to incur a significant loss to the (re)insurance industry. Please email RISK.i@guycarp.com if you wish to be added to the free email distribution list.

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