February 23rd, 2012

2011 Catastrophe Losses and Reinsurance Capital: Part I

Posted at 1:00 AM ET

Reinsurance Capital Resilient Despite Pressures

The reinsurance sector faced multiple headwinds in 2011. Significant losses in Australia, New Zealand, Japan, the United States and Thailand resulted in (re)insurers paying out more than USD100 billion in claims. Adding to the pressure on the market has been the impact of major catastrophe model releases, particularly for US wind risks. Nevertheless, reinsurance capital has remained resilient despite these pressures. The sector’s dedicated capital position recovered from most of its losses in 2011 and ended the year at a level close to that at the start of the year.

Historic Global Catastrophe Losses

(Re)insurers were hit by an exceptional accumulation of global natural catastrophes in 2011. Two of the most damaging earthquakes in recent times struck Japan and New Zealand early in the year, causing huge losses. Several other significant events, including devastating floods in Thailand and Australia, a record-breaking tornado season in the United States and Hurricane Irene making landfall along the US East Coast, combined to cause insured losses of USD108 billion in 2011 (1). Losses were second only to 2005 when (re)insurers paid out more than USD120 billion (2) (see Figure 1).

Figure 1

4_Global Catastrophe Insured Losses - 1970 - 2011 copy

Notes:

1 Swiss Re News Release, December 15, 2011. This preliminary figure includes all events that are estimated to have caused insured losses of greater than USD17.9 million for shipping, greater than USD35.9 million for aviation and greater than USD44.6 million for other property-related events.

2 This figure has been revised from initial 2005 estimates and is inflation-adjusted.

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