Earthquakes main contributor to $36bn 2010 cat loss

The earthquakes that devastated parts of Chile and New Zealand were the largest source of losses this year. They cost the re/insurance industry $8bn and $4bn respectively, according to the 2010 Catastrophe Update report.

Of the eight catastrophes that individually caused insured losses of more than $1bn, five were related to severe weather and storms in the US, Australia and Europe, for a total loss of $7.9bn.

The only man-made event to incur losses in excess of $1bn in 2010 was the Deepwater Horizon oil rig explosion in the Gulf of Mexico.

Although the economic costs from the disaster could reach $35bn, reports said insured losses would be restricted to around $3.5bn as BP and its captive are expected to cover most of the expenses.

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Despite one of the most active Atlantic hurricane seasons on record, producing 19 named storms, no hurricane made US landfall during the 2010 season.

Consequently, insured losses in the US generally matched those of 2009, adding up to $11.2bn in the first nine months of 2010. By comparison, US claims in 2008 cost the re/insurance industry $25.2bn, due mostly to losses from Hurricanes Gustav and Ike.

Floods accounted for significant insured losses of $955m in France and central and eastern Europe. Pakistan and China also endured devastating monsoonal flooding, but the impact on the re/insurance industry was limited by low insurance penetration levels in both countries. (see related story)

For the second consecutive year, tropical cyclones did not incur significant insured losses. Typhoon development in the West Pacific was at a record low in 2010, in part driven by the development of a moderate La Niña event and very warm tropical Atlantic seas surface temperatures.

“Large losses in the first half of the year, coupled with low interest rates and depressed valuations, created a challenging environment for carriers in 2010. Moreover, the active nature of this year’s hurricane season reinforces the fact that catastrophe risk remains elevated as the reinsurance sector prepares for 2011 renewals,” commented David Flandro, Head of Global Business Intelligence at Guy Carp, on the current state of the industry.