Expert Risk Articles

Natural Catastrophes on the rise?

  • Insured claims from natural catastrophes are increasing dramatically.
  • Asian economic growth and climate change impact introduces new challenges.
  • In the past decade, smaller earthquakes often caused higher fatalities.
  • Preparedness and prevention extremely important.

Experts on natural catastrophe risk at Allianz have highlighted the growing trend in insured losses arising from natural catastrophes worldwide in a risk briefing – the Allianz Risk Pulse: Focus Natural Catastrophes – which is released today. The average annual cost of insured claims from natural catastrophes has increased eight-fold since 1970 (up from some US$5 billion in the 1970s and 1980s to over US$40 billion in 2010). The main reason is economic growth: property values are rising, population density and insurance penetration are increasing, often in high risk areas – a trend that is compounded by the fast growth of some Asian economies in catastrophe-prone regions. The impact of climate change must also be closely watched.

The Allianz analysts have also noted that, during the past decade, the earthquakes which caused the highest fatalities were not necessarily the strongest ones. For example, the 2010 quake in Haiti released 500 times less energy than the quake that hit Chile two months later – yet the Haitian quake wreaked much more havoc. The factors which determine the impact are complex and include building design and materials, severity of secondary earthquake effects like tsunamis or fires and lack of preparedness.


Key factors: prevention measures and earthquake preparedness

Proper risk management prior to an event and preparation for a possible natural disaster are identified as key factors in reducing the impact. Using their experience of risk management and claims investigations, insurers such as Allianz can advise their clients on how to analyze risks including natural catastrophes, how to prepare in advance and (for businesses) how to restore operations quickly after an event – a vital element in minimizing business interruption losses.

The insurance industry plays an important role when it comes to helping those affected by natural catastrophes, advising on preparedness and prevention and analyzing risk. Teams of claims regulators, risk managers, natural catastrophe experts and economic research specialists work hard to support clients and to understand natural catastrophes and their effects.

“Terrible events like major natural catastrophes illustrate the value and importance of insurance to society,” says Clement B. Booth, board member of Allianz SE in the Allianz Risk Pulse. “The most important thing is to help those affected unbureaucratically and quickly – and to have a lot of empathy.”

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  1. Expert Commentary

    Having adequate building codes, early warning systems and loss prevention measures in place and being prepared to take the right contingency actions is critical to avoid future losses related to natural catastrophes.

    Apart from lessening the negative impact of climate change carbon emission reduction efforts also offer new business opportunities for instance for the renewable energy sector. This is reflected in significant growth rates in wind energy (340 TWh represents about two percent of the worldwide electricity usage and has doubled in the past three years) or in the substantial growth of the solar industry.

    Renewable energy projects are becoming larger in scale and the associated risks increase e.g. natural hazards, mechanical and electrical breakdowns or design failures. The insurance industry works as a technology enabler by identifying, analyzing and offering mitigation solutions for those risks.

    /assets/Thumbnails/Thumbnails%20for%20Experts%20and%20Contacts/BruchMichael106x70.jpg Michael Bruch

    Michael works in the Chief Underwriting Office for Risk Consulting in Munich. With more than 17 years of experience, he previously worked for the Allianz Center for Technology (AZT) in the Risk & Technology section on risk consulting projects. Now he is responsible for the assessment of emerging risk scenarios and trends and the NatCat risk assessment strategy. Michael holds degrees in environmental engineering and business.