2011 natural catastrophe year in review january 4, 2012 source: noaa
TRANSCRIPT
2011 NATURAL CATASTROPHE YEAR IN REVIEW
January 4, 2012
Source: NOAA
Questions and AnswersQuestions and Answers
Welcome/IntroductionTerese Rosenthal
Welcome/IntroductionTerese Rosenthal
U.S. Natural Catastrophe UpdateCarl Hedde
U.S. Natural Catastrophe UpdateCarl Hedde
Global Natural Catastrophe UpdateErnst Rauch
Global Natural Catastrophe UpdateErnst Rauch
Economic Implications of Natural Catastrophe LossesDr. Robert Hartwig
Economic Implications of Natural Catastrophe LossesDr. Robert Hartwig
Agenda
2
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You will have an opportunity to ask questions at the conclusion of the presentation.
To ask a question, please dial 1 4 on your phone.
An operator will facilitate your participation.
Webinar Interactivity
3
@MunichRe_US @iiiorg @MunichRe_US @iiiorg
Questions and AnswersQuestions and Answers
Live TweetingLive Tweeting
#NATCAT2011#NATCAT2011
U.S. NATURAL CATASTROPHE UPDATE
Carl Hedde, SVP, Head of Risk AccumulationMunich Reinsurance America, Inc.
From 1980 until today all loss events; for USA and selected countries in Europe all loss events since 1970.
Retrospectively, all great disasters since 1950.
In addition, all major historical events starting from 79 AD – eruption of Mt. Vesuvio (3,000 historical data sets).
Currently more than 30,000 events
From 1980 until today all loss events; for USA and selected countries in Europe all loss events since 1970.
Retrospectively, all great disasters since 1950.
In addition, all major historical events starting from 79 AD – eruption of Mt. Vesuvio (3,000 historical data sets).
Currently more than 30,000 events
5
The Database TodayThe Database Today
MR NatCatSERVICEOne of the world‘s largest databases on natural catastrophes
© 2011 Munich Re
U.S. Natural Catastrophes 2011 Headlines
U.S. Natural Catastrophe Update
6© 2011 Munich Re
Most damaging wildfire in Texas history.Most damaging wildfire in Texas history.
Moderate earthquake in Virginia felt across eastern seaboard.Moderate earthquake in Virginia felt across eastern seaboard.
Severe spring flooding events in the Midwest and Great Plains.Severe spring flooding events in the Midwest and Great Plains.
Hurricane Irene and Tropical Storm Lee cause minor wind damage, major flooding in northeastern U.S. Hurricane Irene and Tropical Storm Lee cause minor wind damage, major flooding in northeastern U.S.
Very active thunderstorm (tornado-hail) season with insured losses exceeding $25 billion, more than double the previous record. It was also the deadliest thunderstorm season in over 75 years.
Very active thunderstorm (tornado-hail) season with insured losses exceeding $25 billion, more than double the previous record. It was also the deadliest thunderstorm season in over 75 years.
Insured losses in the United States in 2011 totaled $35.9 billion – above the 2000 to 2010 average loss of $23.8 billion (in 2011 Dollars).Insured losses in the United States in 2011 totaled $35.9 billion – above the 2000 to 2010 average loss of $23.8 billion (in 2011 Dollars).
Natural Disaster Losses in the United States 2011
7© 2011 Munich ReSource: MR NatCatSERVICE
U.S. Natural Catastrophe Update
Natural Disasters in the United States, 1980 – 2011 Number of Events, Annual Totals
Meteorological events(Storm)
Hydrological events(Flood, mass movement)
Climatological events(Extreme temperature, drought, forest fire)
Geophysical events(Earthquake, tsunami, volcanic eruption)
50
100
150
200
250
300
1980 1982 1984 1986 1988 1990 1992 1994 1996 1998 2000 2002 2004 2006 2008 2010
2011 Total171 Events
5
92
14
60
© 2011 Munich ReSource: MR NatCatSERVICE
U.S. Natural Catastrophe Update
8
Insured losses due in the U.S. in 2011 were the 5th highest on record, exceeding $ 35billion.Insured losses due in the U.S. in 2011 were the 5th highest on record, exceeding $ 35billion.
Losses due to Natural Catastrophes in the United States,1980 – 2011
Sources: MR NatCatSERVICE, Property Claims Services
U.S. Natural Catastrophe Update
9© 2011 Munich Re
Overall losses (in 2011 values) Insured losses (in 2011 values)
Significant Natural Catastrophes, 2011$1 billion economic loss and/or 50 fatalities
Sources: (unmarked) - MR NatCatSERVICE, † - Property Claims Services (PCS)
10© 2011 Munich Re
U.S. Natural Catastrophe Update
2011 U.S. THUNDERSTORM SEASON
2011 U.S. Tornado Count
12© 2011 Munich ReSources: NOAA
U.S. Natural Catastrophe Update
Deadliest tornado year since 1925: 552 direct fatalities
Deadliest single tornado since 1947: Joplin, Missouri, 158 fatalities
Most observed tornadoes in a month: 748, April
Largest number of tornadoes in a day: 226, April 27
Most EF5 Tornados in a year: 6 (tied for first with 1974)
Aggregate Insured Thunderstorm Losses: $25.8 billion
Billion-dollar insured loss outbreaks: 6
Late April (Alabama) and May (Joplin) outbreaks each caused insured
losses in excess of $6 billion, and are among top 10 largest natural
catastrophe losses in U.S. history, based on original dollars.
Deadliest tornado year since 1925: 552 direct fatalities
Deadliest single tornado since 1947: Joplin, Missouri, 158 fatalities
Most observed tornadoes in a month: 748, April
Largest number of tornadoes in a day: 226, April 27
Most EF5 Tornados in a year: 6 (tied for first with 1974)
Aggregate Insured Thunderstorm Losses: $25.8 billion
Billion-dollar insured loss outbreaks: 6
Late April (Alabama) and May (Joplin) outbreaks each caused insured
losses in excess of $6 billion, and are among top 10 largest natural
catastrophe losses in U.S. history, based on original dollars.
2011: Year of the Tornado
13© 2011 Munich Re
U.S. Natural Catastrophe Update
Source: Property Claims ServiceMR NatCatSERVICE
U.S. Thunderstorm Loss TrendsAnnual Totals 1980 – 2011
Average thunderstorm losses have increased fivefold since 1980.Average thunderstorm losses have increased fivefold since 1980.
14© 2011 Munich Re
2011 Total $25.8 bn
U.S. Natural Catastrophe Update
U.S. TROPICAL CYCLONES 2011
Photo: NASA
Tropical Cyclone Impacting the United States in 2011
Source: NOAA
IreneDon
Lee
16© 2011 Munich Re
U.S. Natural Catastrophe Update
U.S. Hurricanes in 2011
Landfalls on August 27 over the NC Outer Banks as a Category 1 hurricane and on August 28 over Brigantine, NJ, and Coney Island, NY, as a tropical storm.
Minor to moderate wind damage in North Carolina and Virginia, heavy indirect wind damage due to tree fall further north.
Record flooding across northeast, particularly New Jersey, New York, and Vermont.
Economic Losses in U.S. of $10 billion, insured losses of $5 billion.
Landfalls on August 27 over the NC Outer Banks as a Category 1 hurricane and on August 28 over Brigantine, NJ, and Coney Island, NY, as a tropical storm.
Minor to moderate wind damage in North Carolina and Virginia, heavy indirect wind damage due to tree fall further north.
Record flooding across northeast, particularly New Jersey, New York, and Vermont.
Economic Losses in U.S. of $10 billion, insured losses of $5 billion.
Photo: FEMA
17© 2011 Munich Re
Hurricane IreneHurricane Irene
U.S. Natural Catastrophe Update
Other U.S. Tropical Cyclones in 2011
Landfall in Louisiana on September 4 with sustained winds of 45 mph
Minor wind damage and flooding in Louisiana; As a remnant low, Lee aggravated existing Irene flooding and triggered new flooding in northeastern U.S., particularly in Pennsylvania.
Estimated $510 million insured loss.
Landfall in Louisiana on September 4 with sustained winds of 45 mph
Minor wind damage and flooding in Louisiana; As a remnant low, Lee aggravated existing Irene flooding and triggered new flooding in northeastern U.S., particularly in Pennsylvania.
Estimated $510 million insured loss.
Tropical Storm DonTropical Storm Don
Landfall near Baffin Bay, Texas, on July 30
Sustained winds at landfall of 50 mph, no significant damage
Landfall near Baffin Bay, Texas, on July 30
Sustained winds at landfall of 50 mph, no significant damage
Tropical Storm LeeTropical Storm Lee
18© 2011 Munich Re
U.S. Natural Catastrophe Update
There has not been a major hurricane landfall in the U.S. since 2005.There has not been a major hurricane landfall in the U.S. since 2005.
Number of U.S. Landfalling Tropical Cyclones1900 - 2011
Source: NOAA 19© 2011 Munich Re
U.S. Natural Catastrophe Update
The current 5-year average (2007-2011) insured tropical cyclone loss is $4.1 billion per year.The current 5-year average (2007-2011) insured tropical cyclone loss is $4.1 billion per year.
Insured U.S. Tropical Cyclone Losses, 1980 - 2011
Sources: Property Claims Service, MR NatCatSERVICE, NFIP 20© 2011 Munich Re
U.S. Natural Catastrophe Update
2011 Total $5.5 bn
OTHER U.S. NATURAL CATASTROPHES IN 2011
Source: FEMASource: FEMA
Lower Mississippi Flood of 2011
Heavy snowmelt, saturated soils, and over 20 inches of rain in a month lead to the worst flooding of the lower Mississippi River since 1927.
Record river crests at Vicksburg and Natchez; Morganza Spillway opened in Louisiana to protect Baton Rouge and New Orleans from possible levee failures.
Extensive agricultural damage, property, and inland marine losses due to flood. Estimated economic losses of $2 billion and insured losses of $500 million.
Heavy snowmelt, saturated soils, and over 20 inches of rain in a month lead to the worst flooding of the lower Mississippi River since 1927.
Record river crests at Vicksburg and Natchez; Morganza Spillway opened in Louisiana to protect Baton Rouge and New Orleans from possible levee failures.
Extensive agricultural damage, property, and inland marine losses due to flood. Estimated economic losses of $2 billion and insured losses of $500 million.
Source: NASA 22© 2011 Munich Re
U.S. Natural Catastrophe Update
Number of Acres Burned in Wildfires, 1980 – 2011
Source: National Interagency Fire Center © 2011 Munich Re 23
U.S. Natural Catastrophe Update
2011 Total8.3 million acres
Notable Wildfires in 2011
Worst wildfire year on record in
Texas due to persistent drought.
Spring: Over 3 million acres
burned in west Texas from 12
major seats of fire. Over 200
homes and businesses
destroyed, $50 million insured
loss.
September: Bastrop County
Complex Fire near San Antonio
destroys over 1,600 homes,
insured loss of $530 million.
Worst wildfire year on record in
Texas due to persistent drought.
Spring: Over 3 million acres
burned in west Texas from 12
major seats of fire. Over 200
homes and businesses
destroyed, $50 million insured
loss.
September: Bastrop County
Complex Fire near San Antonio
destroys over 1,600 homes,
insured loss of $530 million.Source: FEMA
24© 2011 Munich Re
U.S. Natural Catastrophe Update
Average annual winter storm losses have almost doubled since the early 1980s.Average annual winter storm losses have almost doubled since the early 1980s.
Source: Property Claims ServiceMR NatCatSERVICE © 2011 Munich Re
U.S. Winter Storm Loss Trends Annual totals 1980 – 2011
2011 Total$2.0 billion
U.S. Natural Catastrophe Update
25
Central Virginia Earthquake
Magnitude 5.8 on August 23,
largest ever recorded in Virginia.
Felt as far away as Canada to the
north and Savannah, GA to the
South.
Minor structural and contents
damage near epicenter and to old
masonry buildings, including the
U.S. National Cathedral and the
Washington Monument in the
District of Columbia.
Only minor economic and insured
losses.
Magnitude 5.8 on August 23,
largest ever recorded in Virginia.
Felt as far away as Canada to the
north and Savannah, GA to the
South.
Minor structural and contents
damage near epicenter and to old
masonry buildings, including the
U.S. National Cathedral and the
Washington Monument in the
District of Columbia.
Only minor economic and insured
losses. Source: FEMA
Source: USGS © 2011 Munich Re 26
U.S. Natural Catastrophe Update
GLOBAL NATURAL CATASTROPHE UPDATE
Ernst RauchHead of Corporate Climate CenterMunich Re
Natural Catastrophes Worldwide 2011Headlines
Number of events: 820
The number is in line with the 10-year-average (2001-2010: 790).
Number of events: 820
The number is in line with the 10-year-average (2001-2010: 790).
Overall direct losses: US$ 380bn
2011 is the costliest year for overall losses due to natural catastrophes.
Overall direct losses: US$ 380bn
2011 is the costliest year for overall losses due to natural catastrophes.
Insured losses: US$ 105bn
The insured losses are the highest figures too, topped the 2005 losses in original values
(US$ 101bn).
Insured losses: US$ 105bn
The insured losses are the highest figures too, topped the 2005 losses in original values
(US$ 101bn).
Fatalities: 27,000
The number is quite low in comparison with previous years (2001-2010:106,000).
The figures do not include the drought fatalities in East Africa, esp. Somalia.
Fatalities: 27,000
The number is quite low in comparison with previous years (2001-2010:106,000).
The figures do not include the drought fatalities in East Africa, esp. Somalia.
Global Natural Catastrophe Update
© 2011 Munich Re 28
Natural Catastrophes Worldwide 2011Significant Events
Earthquake, tsunami Japan
New Zealand
Floods Australia and Thailand
Drought, famine Somalia
Global Natural Catastrophe Update
© 2011 Munich Re 29
Natural Catastrophes Worldwide 2011Overview and comparison with previous years
Global Natural Catastrophe Update
© 2011 Munich Re 30
Natural Catastrophes Worldwide 2011Overview and comparison with previous years
Global Natural Catastrophe Update
© 2011 Munich Re 31
Natural Catastrophes Worldwide 2011Overview and comparison with previous years
Global Natural Catastrophe Update
© 2011 Munich Re 32
Natural Catastrophes Worldwide 2011Overview and comparison with previous years
Global Natural Catastrophe Update
© 2011 Munich Re 33
Natural Catastrophes Worldwide 2011Overview and comparison with previous years
Global Natural Catastrophe Update
© 2011 Munich Re 34
Natural Catastrophes Worldwide 2011The five costliest natural catastrophes for the insurance industry
Source: MR NatCatSERVICE
Global Natural Catastrophe Update
© 2011 Munich Re 35
Natural Catastrophes Worldwide 1980 – 2011Number of events
Number
Meteorological events(Storm)
Hydrological events(Flood, mass movement)
Climatological events(Extreme temperature, drought, forest fire)
Geophysical events(Earthquake, tsunami, volcanic eruption)
200
400
600
800
1 000
1 200
1980 1982 1984 1986 1988 1990 1992 1994 1996 1998 2000 2002 2004 2006 2008 2010
Source: MR NatCatSERVICE
2011 Total820 Events
© 2011 Munich Re
Global Natural Catastrophe Update
36
Natural Catastrophes Worldwide 1980 – 2011Overall and insured losses
(bn US$)
Overall losses (in 2011 values) Insured losses (in 2011 values)
50
100
150
200
250
300
350
400
1980 1982 1984 1986 1988 1990 1992 1994 1996 1998 2000 2002 2004 2006 2008 2010
Overall losses totaled $380 billion; Insured losses totaled $105 billionOverall losses totaled $380 billion; Insured losses totaled $105 billion
© 2011 Munich Re 37Source: MR NatCatSERVICE
Global Natural Catastrophe Update
Geophysical events(earthquake, tsunami, volcanic activity)
Meteorological events (storm)
Hydrological events(flood, mass movement)
Selection of significant loss events (see table)
Natural catastrophes
Earthquake, tsunami Japan, 11 March
EarthquakeNew Zealand, 22 Feb.
Cyclone Yasi Australia, 2–7 Feb.
Landslides, flash floodsBrazil, 12/16 Jan.
Floods, flash floods Australia, Dec. 2010–Jan. 2011
Severe storms, tornadoesUSA, 22–28 April
Severe storms, tornadoesUSA, 20–27 May
WildfiresUSA, April/Sept.
EarthquakeNew Zealand, 13 June
FloodsUSA, April–May
Climatological events(extreme temperature, drought, wildfire)
Number of events: 820Number of events: 820
DroughtUSA, Oct. 2010– ongoing
Hurricane IreneUSA, Caribbean22 Aug.–2 Sept.
WildfiresCanada, 14–22 May
DroughtSomaliaOct. 2010–Sept. 2011
FloodsPakistanAug.–Sept.
FloodsThailandAug.–Nov.
Earthquake Turkey23 Oct.
Flash floods, floodsItaly, France, Spain4–9 Nov.
Floods, landslidesGuatemala, El Salvador11–19 Oct.
Tropical Storm WashiPhilippines, 16–18 Dec.
Winter Storm JoachimFrance, Switzerland, Germany, 15–17 Dec.
Global Natural Catastrophe Update
© 2011 Munich Re 38Source: MR NatCatSERVICE
Natural Catastrophes 2011World map
Earthquake New Zealand February 2011
Source: MR NatCatSERVICE*Losses in original values
Region Overall losses Insured losses Fatalities
South Island, Canterbury, Christchurch, Lyttelton US$ 16bn* US$ 13bn* 181
Source: Munich ReSource: Munich Re
Global Natural Catastrophe Update
© 2011 Munich Re 39
Floods ThailandAugust – November 2011
Region Overall losses Insured losses Fatalities
Phichit, Nakhon Sawan, Phra Nakhon Si Ayuttaya, Pathumthani, Nonthaburi, Bangkok
US$ 40bn* US$ 10bn* 813
Source: MR NatCatSERVICE*Losses in original values
Source: ReutersSource: Reuters
Global Natural Catastrophe Update
© 2011 Munich Re 40
Natural Catastrophes Worldwide 2011Insured losses US$ 105bn - Percentage distribution per continent
Continent Insured losses US$ m
America (North and South America) 40,000
Europe 2,000
Africa Minor damages
Asia 45,000
Australia/Oceania 18,000
37%
2%
44%
17%
<1%
Global Natural Catastrophe Update
© 2011 Munich Re 41Source: MR NatCatSERVICE
Natural Catastrophes Worldwide 1980 – 2011 Insured losses US$ 870bn - Percentage distribution per continent
Continent Insured losses US$ m
America (North and South America) 566,000
Europe 146,000
Africa 2,000
Asia 115,000
Australia/Oceania 41,000
66%
16%
<1%
13%
5%
Global Natural Catastrophe Update
© 2011 Munich Re 42Source: MR NatCatSERVICE
20
40
60
80
100
120
140
160
180
200
1980 1982 1984 1986 1988 1990 1992 1994 1996 1998 2000 2002 2004 2006 2008 2010
Natural Catastrophes in Asia 1980 – 2011Overall and insured losses
(bn US$)
Overall losses (in 2011 values) Insured losses (in 2011 values)
266bn266bn
Global Natural Catastrophe Update
© 2011 Munich Re 43Source: MR NatCatSERVICE
Natural Catastrophes Worldwide 2011
SummarySummary
US$ 105bn insured losses - 47% of losses due to earthquakes (30-year-average = 10%)US$ 105bn insured losses - 47% of losses due to earthquakes (30-year-average = 10%)
Asia (44%) and North America (37%) are mainly impacted in terms of insured lossesAsia (44%) and North America (37%) are mainly impacted in terms of insured losses
Japan earthquake, tsunami – 15,840 fatalities – deadliest natural disaster in 2011Japan earthquake, tsunami – 15,840 fatalities – deadliest natural disaster in 2011
New Zealand earthquakes – high losses for the insurance market, minor fatalitiesNew Zealand earthquakes – high losses for the insurance market, minor fatalities
Thailand floods – costliest flood event for overall and insured losses Thailand floods – costliest flood event for overall and insured losses
Building codes are essential to save lives – however, insured losses are neverthelesssignificantBuilding codes are essential to save lives – however, insured losses are neverthelesssignificant
Global Natural Catastrophe Update
© 2011 Munich Re 44Source: MR NatCatSERVICE
Q AND A
Market and Financial Impact of 2011 Catastrophe Losses
Insurance Information InstituteJanuary 4, 2012
Robert P. Hartwig, Ph.D., CPCU, President & EconomistInsurance Information Institute 110 William Street New York, NY 10038
Tel: 212.346.5520 Cell: 917.453.1885 [email protected] www.iii.org
47
2011: Nowhere to Run, Nowhere to Hide
Most of the Country East of the Rockies Suffered Severe Weather in 2011, Impacting
Most Insurers
Location of Tornadoes in the US, January 1—December 27, 2011
Source: NOAA Storm Prediction Center; http://www.spc.noaa.gov/climo/online/monthly/2011_annual_summary.html# 48
1,894 tornadoes killed 552 people in 2011, including
at least 340 on April 26 mostly in the Tuscaloosa area, and 130 in
Joplin on May 22
Location of Large Hail Reports in the US, January 1—December 27, 2011
Source: NOAA Storm Prediction Center; http://www.spc.noaa.gov/climo/online/monthly/2011_annual_summary.html# 49
There were 9,417 “Large Hail”
reports in 2011, causing extensive damage to homes,
businesses and vehicles
Location of Wind Damage Reports in the US, January 1—December 27, 2011
Source: NOAA Storm Prediction Center; http://www.spc.noaa.gov/climo/online/monthly/2011_annual_summary.html# 50
There were 18,685 “Wind Damage” reports through Dec. 27, causing
extensive damage to homes and,
businesses
Severe Weather Reports,January 1—December 27, 2011
51Source: NOAA Storm Prediction Center; http://www.spc.noaa.gov/climo/online/monthly/2011_annual_summary.html#
There have been 29,996
severe weather reports through
Dec. 5; including 1,894
tornadoes; 9,417 “Large Hail” reports
and 18,685 high wind events
Number of Federal Disaster Declarations, 1953-2011*
13 1
7 18
16
16
7 71
21
22
22
0 25
25
11
11
19
29
17
17
48
46
46
38
30
22 25
42
23
15
24
21
34
27 28
23
11
31
38
45
32 3
63
27
54
46
55
04
54
5 49
56
69
48 5
26
37
55
98
19
9
43
0
20
40
60
80
100
120
53
54
55
56
57
58
59
60
61
62
63
64
65
66
67
68
69
70
71
72
73
74
75
76
77
78
79
80
81
82
83
84
85
86
87
88
89
90
91
92
93
94
95
96
97
98
99
00
01
02
03
04
05
06
07
08
09
10
11
*
*Through December 31, 2011.Source: Federal Emergency Management Administration: http://www.fema.gov/news/disaster_totals_annual.fema ; Insurance Information Institute.
The Number of Federal Disaster Declarations Is Rising and Set a New Record in 2011
The number of federal disaster declarations set a
new record in 2011, with 99, shattering 2010’s record 81
declarations.
There have been 2,049 federal disaster
declarations since 1953. The average
number of declarations per year is 34 from
1953-2010, though that few haven’t been
recorded since 1995.
53
Federal Disasters Declarations by State, 1953 – 2011: Highest 25 States*
86
78
70
65 63
58
55 55 53 53 51 50 50 48 48 47 47 47 46 45 45 44 42 40 39
0
10
20
30
40
50
60
70
80
90
100
TX CA OK NY FL LA AL KY AR MO IL MS TN IA MN KS NE PA WV OH VA WV ND NC IN
Dis
aste
r Dec
lara
tions
*Through Dec. 31, 2011.
Source: FEMA: http://www.fema.gov/news/disaster_totals_annual.fema; Insurance Information Institute.
Over the past nearly 60 years,
Texas has had the highest number of Federal Disaster
Declarations
54
Federal Disasters Declarations by State, 1953 – 2011: Lowest 25 States*
39 39
36 36 35
33 33
28 27 26 26 25 25 24 24 23 22
20
17 17 16 15 14
11
9 9 9
0
10
20
30
40
50
ME SD AK GA WI VT NJ NH OR MA PR HI MI AZ NM ID MD MT NV CT CO SC DE DC RI UT WY
Dis
aste
r Dec
lara
tions
*Through Dec. 31. Includes Puerto Rico and the District of Columbia.
Source: FEMA: http://www.fema.gov/news/disaster_totals_annual.fema; Insurance Information Institute.
Over the past nearly 60 years, Wyoming, Utah and Rhode Island had the fewest number of
Federal Disaster Declarations
55
Top 14 Most Costly Disastersin U.S. History
(Insured Losses, 2011 Dollars, $ Billions)
*Losses will actually be broken down into several “events” as determined by PCS. Includes losses for the period April 1 – June 30.Sources: PCS; Insurance Information Institute inflation adjustments.
$9.0$11.9 $13.1
$19.1$21.3
$24.0 $25.0
$47.6
$8.5$7.7$6.5$5.5$4.4$4.3
$0$5
$10$15$20$25$30$35$40$45$50
Irene(2011)
Jeanne(2004)
Frances(2004)
Rita (2005)
Hugo (1989)
Ivan (2004)
Charley(2004)
Wilma(2005)
Ike (2008)
Northridge(1994)
SpringTornadoes& Storms*
(2011)
9/11Attack(2001)
Andrew(1992)
Katrina(2005)
Taken as a single event, the Spring 2011 tornado and storm season are
is the 4th costliest event in US insurance history
56
P/C Insurance Industry Financial Overview
Profit Recovery Was Set Back in 2011 by High Catastrophe
Loss & Other Factors
P/C Net Income After Taxes1991–2011:Q3 ($ Millions)
$1
4,1
78
$5
,84
0
$1
9,3
16
$1
0,8
70
$2
0,5
98
$2
4,4
04 $
36
,81
9
$3
0,7
73
$2
1,8
65
$3
,04
6
$3
0,0
29
$6
2,4
96
$3
,04
3
$3
4,6
70
$7
,97
9
$2
8,6
72
-$6,970
$6
5,7
77
$4
4,1
55
$2
0,5
59
$3
8,5
01
-$10,000
$0
$10,000
$20,000
$30,000
$40,000
$50,000
$60,000
$70,000
$80,000
91 92 93 94 95 96 97 98 99 00 01 02 03 04 05 06 07 08 09 10 11*
2005 ROE*= 9.6% 2006 ROE = 12.7% 2007 ROE = 10.9% 2008 ROE = 0.1% 2009 ROE = 5.0% 2010 ROE = 5.6% 2011:Q3 ROAS1 = 1.9%
P-C Industry 2011:Q3 profits were down 71% to $8.0B vs. 2010:Q3,
due primarily to high catastrophe losses and as non-cat
underwriting results deteriorated
* ROE figures are GAAP; 1Return on avg. surplus. Excluding Mortgage & Financial Guaranty insurers yields a 3.0% ROAS for 2011:Q3, 7.5% for 2010 and 7.4% for 2009.Sources: A.M. Best, ISO, Insurance Information Institute
A 100 Combined Ratio Isn’t What ItOnce Was: Investment Impact on ROEs
Combined Ratio / ROE
* 2011 figure is return on average statutory surplus. 2008 -2011 figures exclude mortgage and financial guaranty insurers. 2011:Q3 combined ratio including M&FG insurers is 109.9, ROAS = 1.9%. Source: Insurance Information Institute from A.M. Best and ISO data.
97.5
100.6 100.1 100.8
92.7
101.099.3
100.8
108.2
95.7
3.0%
5.6%5.0%
0.1%
9.6%
15.9%
14.3%
12.7% 10.9%
8.8%
80
85
90
95
100
105
110
1978 1979 2003 2005 2006 2007 2008* 2009* 2010* 2011:Q3*0%
3%
6%
9%
12%
15%
18%
Combined Ratio ROE*
Combined Ratios Must Be Lower in Today’s DepressedInvestment Environment to Generate Risk Appropriate ROEs
A combined ratio of about 100 generated ~5.5% ROE in 2009/10,
10% in 2005 and 16% in 1979
-5%
0%
5%
10%
15%
20%
25%
75
76
77
78
79
80
81
82
83
84
85
86
87
88
89
90
91
92
93
94
95
96
97
98
99
00
01
02
03
04
05
06
07
08
09
10
11
*
Profitability Peaks & Troughs in the P/C Insurance Industry, 1975 – 2011*
*Profitability = P/C insurer ROEs are I.I.I. estimates. 2011 figure is an estimate based on annualized ROAS through Q3 data. Note: Data for 2008-2011 exclude mortgage and financial guaranty insurers. For 2011:Q3 ROAS = 1.9% including M&FG.Source: Insurance Information Institute; NAIC, ISO, A.M. Best.
1977:19.0% 1987:17.3%
1997:11.6%2006:12.7%
1984: 1.8% 1992: 4.5% 2001: -1.2%
10 Years
10 Years9 Years
2011:3.0%*
History suggests next ROE peak will be in 2016-2017
ROE
1975: 2.4%
60
-5%
0%
5%
10%
15%
20%
25%
71 72 73 74 75 76 77 78 79 80 81 82 83 84 85 86 87 88 89 90 91 92 93 94 95 96 97 98 99 00 01 02 03 04 05 06 07 08 09 10 11*
Soft Market Persisted in 2010 but Growth Returned: More in 2011?
(Percent)1975-78 1984-87 2000-03
*2011 figure is through first 9 months vs. same period in 2010 Shaded areas denote “hard market” periodsSources: A.M. Best (historical and forecast), ISO, Insurance Information Institute.
Net Written Premiums Fell 0.7% in 2007 (First Decline
Since 1943) by 2.0% in 2008, and 4.2% in 2009, the First 3-Year Decline Since 1930-33.
NWP was up 0.9% in 2010
2011:Q3 growth
was +3.1%
61
P/C Net Premiums Written: % Change, Quarter vs. Year-Prior Quarter
Sources: ISO, Insurance Information Institute.
Finally! Back-to-back quarters of net written premium growth(vs. the same quarter, prior year)
10.2
%15
.1%
16.8
%16
.7%
12.5
%10
.1%
9.7%
7.8%
7.2%
5.6%
2.9%
5.5%
-4.6
%-4
.1%
-5.8
%-1
.6%
10.3
%10
.2% 13
.4%
6.6%
-1.6
%2.
1%0.
0%-1
.9%
0.5%
-1.8
%-0
.7%
-4.4
%-3
.7%
-5.3
%-5
.2%
-1.4
%-1
.3%
1.3% 2.
3%1.
3%3.
5%1.
6%4.
1%
-10%
-5%
0%
5%
10%
15%
20%
2002
:Q1
2002
:Q2
2002
:Q3
2002
:Q4
2003
:Q1
2003
:Q2
2003
:Q3
2003
:Q4
2004
:Q1
2004
:Q2
2004
:Q3
2004
:Q4
2005
:Q1
2005
:Q2
2005
:Q3
2005
:Q4
2006
:Q1
2006
:Q2
2006
:Q3
2006
:Q4
2007
:Q1
2007
:Q2
2007
:Q3
2007
:Q4
2008
:Q1
2008
:Q2
2008
:Q3
2008
:Q4
2009
:Q1
2009
:Q2
2009
:Q3
2009
:Q4
2010
:Q1
2010
:Q2
2010
:Q3
2010
:Q4
2011
:Q1
2011
:Q2
2011
:Q3
Through 2011:Q3, growth in personal lines
predominating cos. (+3.1%) and commercial lines predominating cos.
(+3.9%), diversified (+2.3%)
62
Change in Commercial Rate Renewals, by Account Size: 1999:Q4 to 2011:Q3
Source: Council of Insurance Agents and Brokers; Insurance Information Institute.
Percentage Change (%)
Peak = 2001:Q4 +28.5%
Pricing Turned Negative in Early
2004 and Has Been Negative
Ever Since
Pricing turned positive (+0.9%) in Q3:2011, the first increase in
nearly 7 years (Q4:2003)
KRW Effect: No Lasting Impact
Trough = 2007:Q3 -13.6%
63
Average Commercial Rate Change,All Lines, (1Q:2004–4Q:2011E*)
-3.2
%-5
.9%
-7.0
%-9
.4%
-9.7
% -8.2
%-4
.6% -2
.7%
-3.0
%-5
.3%
-9.6
%-1
1.3
%-1
1.8
%-1
3.3
%-1
2.0
%-1
3.5
%-1
2.9
% -11
.0%
-6.4
% -5.1
%-4
.9%
-5.8
%-5
.6%
-5.3
%-6
.4% -5.2
%-5
.4%
-2.9
%
1.7
%
-0.1
% 0.9
%
-0.1
%
-16%
-14%
-12%
-10%
-8%
-6%
-4%
-2%
0%
2%
4%
1Q
04
2Q
04
3Q
04
4Q
04
1Q
05
2Q
05
3Q
05
4Q
05
1Q
06
2Q
06
3Q
06
4Q
06
1Q
07
2Q
07
3Q
07
4Q
07
1Q
08
2Q
08
3Q
08
4Q
08
1Q
09
2Q
09
3Q
09
4Q
09
1Q
10
2Q
10
3Q
10
4Q
10
1Q
11
2Q
11
3Q
11
4Q
11
Source: Council of Insurance Agents & Brokers (1Q04-4Q11); Marsh (Q411E); Insurance Information Institute
KRW Effect
Pricing as of Q3:2011 is positive for the first time
since 2003. Slightly stronger gains in Q4.
(Percent)
Q2 2011 marked the 30th consecutive quarter of price
declines
64
Change in Commercial Rate Renewals, by Line: 2011:Q3
Source: Council of Insurance Agents and Brokers; Insurance Information Institute.
Major Commercial Lines Renewed Uniformly Upward in Q3:2011 for the First Time Since 2003; Property Lines &
Workers Comp Leading the Way
Percentage Change (%)
1.5%1.9%
3.0%
4.1%
0.2% 0.3%0.6%
0.8% 0.8%
1.3%
0.0%
0.5%
1.0%
1.5%
2.0%
2.5%
3.0%
3.5%
4.0%
4.5%
Ge
ne
ral
Lia
bili
ty
Su
rety
Co
mm
l Au
to
Co
nst
ruct
ion
D&
O
Um
bre
lla
EP
L
Bu
s.In
terr
up
tion
Co
mm
erc
ial
Pro
pe
rty
Wo
rke
rsC
om
p
Property lines are showing larger increases than
casualty lines, with the exception of workers
compensation
Source: Guy Carpenter, GC Capital Ideas.com, November 23, 2011.
Most excess reinsurance capacity was
removed from the market in 2011,
leaving uncertainty as to the direction of
2012 reinsurance renewals
Historical Capital Levels of Guy Carpenter Reinsurance Composite, 1998—2Q11
UNDERWRITING
66
Catastrophes Will Lead Insurers their Largest
Underwriting Loss in a Decade
67
P/C Insurance Industry Combined Ratio, 2001–2011:Q3*
* Excludes Mortgage & Financial Guaranty insurers 2008--2011. Including M&FG, 2008=105.1, 2009=100.7, 2010=102.4, 2011=109.9 Sources: A.M. Best, ISO.
95.7
99.3100.8
108.2
101.0
92.6
100.898.4
100.1
107.5
115.8
90
100
110
120
2001 2002 2003 2004 2005 2006 2007 2008 2009 2010 2011*
Best Combined
Ratio Since 1949 (87.6)
As Recently as 2001, Insurers Paid Out
Nearly $1.16 for Every $1 in Earned
Premiums
Relatively Low CAT Losses, Reserve Releases
Cyclical Deterioration
Heavy Use of Reinsurance Lowered Net
Losses
Relatively Low CAT Losses, Reserve Releases
Avg. CAT Losses,
More Reserve Releases
Higher CAT
Losses, Shrinking Reserve
Releases, Toll of Soft
Market
Homeowners Insurance Combined Ratio: 1990–2011P
11
3.0
11
7.7
15
8.4
11
3.6
10
1.0 10
9.4
10
8.2
11
1.4 1
21
.7
10
9.3
98
.2
94
.4 10
0.3
88
.9 95
.6
11
6.8
10
5.7
10
6.7 11
6.0
11
8.4
11
2.7 12
1.7
80
90
100
110
120
130
140
150
160
170
90 91 92 93 94 95 96 97 98 99 00 01 02 03 04 05 06 07 08 09 10 11P
Homeowners Line Could Deteriorate in 2011 Due to Large Cat Losses. Extreme Regional Variation Can Be Expected Due to
Local Catastrophe Loss Activity
Sources: A.M. Best (1990-2010); Insurance Information Institute (2011P).
Underwriting Gain (Loss)1975–2011*
* Includes mortgage and financial guaranty insurers in all yearsSources: A.M. Best, ISO; Insurance Information Institute.
Large Underwriting Losses Are NOT Sustainable in Current Investment Environment
-$55
-$45
-$35
-$25
-$15
-$5
$5
$15
$25
$35
75 76 77 78 79 80 81 82 83 84 85 86 87 88 89 90 91 92 93 94 95 96 97 98 99 00 01 02 03 04 05 06 07 08 09 1011*
Cumulative underwriting deficit from 1975 through
2010 is $455B
($ Billions)Underwriting losses in
2011 at $34.9
through Q3 will be
largest since 2001
70
Combined Ratio Points Associated with Catastrophe Losses: 1960 – 2011E*
*Insurance Information Institute estimates for 2010 and 2011.Notes: Private carrier losses only. Excludes loss adjustment expenses and reinsurance reinstatement premiums. Figures are adjusted for losses ultimately paid by foreign insurers and reinsurers.Source: ISO; Insurance Information Institute.
0.4
1.2
0.4 0.
8 1.3
0.3 0.4 0.
71.
51.
00.
40.
4 0.7
1.8
1.1
0.6
1.4 2.
01.
3 2.0
0.5
0.5 0.7
3.0
1.2
2.1
8.8
2.3
5.9
3.3
2.8
1.0
3.6
2.9
1.6
5.4
1.6
3.3
3.3
8.1
2.7
1.6
5.0
2.6 3.
35.
0
3.6
0.9
0.1
1.1
1.1
0.8
0
1
2
3
4
5
6
7
8
9
10
1960
1962
1964
1966
1968
1970
1972
1974
1976
1978
1980
1982
1984
1986
1988
1990
1992
1994
1996
1998
2000
2002
2004
2006
2008
2010
E
The Catastrophe Loss Component of Private Insurer Losses Has Increased Sharply in Recent Decades
Avg. CAT Loss Component of the Combined Ratio
by Decade
1960s: 1.04 1970s: 0.85 1980s: 1.31 1990s: 3.39 2000s: 3.52 2010s: 4.15*
Combined Ratio Points
Financial Strength & Underwriting
71
Cyclical Pattern in P-C Impairment History is Directly Tied to
Underwriting, Reserving & Pricing
P/C Insurer Impairments, 1969–20108
15
12
71
19
34
91
31
21
99
16
14
13
36
49
31 3
45
04
85
56
05
84
12
91
61
23
11
8 19
49 50
47
35
18
14 15 16 18
11
5
0
10
20
30
40
50
60
70
69
70
71
72
73
74
75
76
77
78
79
80
81
82
83
84
85
86
87
88
89
90
91
92
93
94
95
96
97
98
99
00
01
02
03
04
05
06
07
08
09
10
Source: A.M. Best Special Report “1969-2010 Impairment Review,” June 21, 2010; Insurance Information Institute.
The Number of Impairments Varies Significantly Over the P/C Insurance Cycle, With Peaks Occurring Well into Hard Markets
3 small insurers in Missouri did encounter
problems in 2011 following the May
tornado in Joplin. They were absorbed by a
larger insurer and all claims were paid.
73
Reasons for US P/C Insurer Impairments, 1969–2010
3.6%4.0%
8.6%
7.3%
7.8%
7.1%
7.8%13.6%
40.3%
Source: A.M. Best: 1969-2010 Impairment Review, Special Report, April 2011.
Historically, Deficient Loss Reserves and Inadequate Pricing AreBy Far the Leading Cause of P-C Insurer Impairments.
Investment and Catastrophe Losses Play a Much Smaller Role
Deficient Loss Reserves/Inadequate Pricing
Reinsurance Failure
Rapid GrowthAlleged Fraud
Catastrophe Losses
Affiliate Impairment
Investment Problems (Overstatement of Assets)
Misc.
Sig. Change in Business
SURPLUS/CAPITAL/CAPACITY
74
Have Large Global Losses Reduced Capacity in the Industry, Setting
the Stage for a Market Turn?
75
Policyholder Surplus, 2006:Q4–2011:Q3
Sources: ISO, A.M .Best.
($ Billions)
$487.1$496.6
$512.8$521.8
$478.5
$455.6
$437.1
$463.0
$490.8
$511.5
$540.7$530.5
$544.8
$556.9 $559.1
$538.6
$564.7
$505.0$515.6$517.9
$420
$440
$460
$480
$500
$520
$540
$560
$580
06:Q4 07:Q1 07:Q2 07:Q3 07:Q4 08:Q1 08:Q2 08:Q3 08:Q4 09:Q1 09:Q2 09:Q3 09:Q4 10:Q1 10:Q2 10:Q3 10:Q4 11:Q1 11:Q2 11:Q3
2007:Q3Previous Surplus Peak
Quarterly Surplus Changes Since 2011:Q1 Peak
11:Q2: -$5.6B (-1.0%)
11:Q3: -$26.1B (-4.6%)
Surplus as of 9/30/11 was down 4.6% below its all
time record high of $564.7B set as of 3/31/11. Further
declines are possible.
*Includes $22.5B of paid-in capital from a holding company parent for one insurer’s investment in a non-insurance business in early 2010.
The Industry now has $1 of surplus for every $0.83 of NPW, close to the strongest claims-
paying status in its history.
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© Copyright 2012 Munich Reinsurance America, Inc. All rights reserved. "Munich Re" and the Munich Re logo are internationally protected registered trademarks. The material in this presentation is provided for your information only, and is not permitted to be further distributed without the express written permission of Munich Reinsurance America, Inc. or Munich Re. This material is not intended to be legal, underwriting, financial, or any other type of professional advice. Examples given are for illustrative purposes only. Each reader should consult an attorney and other appropriate advisors to determine the applicability of any particular contract language to the reader's specific circumstances.