Natural and man-made disasters in 2010 – the insurance bill

A long time ago, when I was flirting with journalism, I got a really disturbing job on an FT publication called ‘World Insurance Report’ (presumably now defunct). I had to compile their ‘world loss log’ – a summary of all the major disasters of the previous fortnight, and the likely implications for insurance pay-outs. I scoured the press in search of natural disasters, industrial accidents etc, but the inhuman calculus of the insurance industry – in financial terms a minor chemical burn in an Arkansas factory is bigger than a bus plunge in Bangladesh that kills dozens of passengers, and the generally grim nature of the task started giving me nightmares and I had to stop.

But some poor sod is still at it, according to a recent Economist piece, and the calculus hasn’t changed:

“Swiss Re, a reinsurance company, puts global economic losses from natural and man-made disasters in 2010 at $218 billion, more than three times the previous year’s figure of $68 billion. Around 304,000 people died in such catastrophes in 2010, making it the deadliest year since 1976 [eh, what about the Asian tsunami of 2004?]. This was due in large part to the devastating earthquake that hit Haiti in January 2010, which left an estimated 222,570 people dead. Some of the deadliest disasters were in developing countries, where insurance is relatively uncommon. Given the increased losses in 2010, the hit taken by the insurance industry grew only modestly, increasing by over 60%, to $43 billion.”

 So only a fifth of the natural disaster damage in 2010 was insured, and mainly concerned storms ($11.75m per fatality) rather than earthquakes ($57,000 per fatality – not that relatives of the dead in Haiti saw any of that). Look at the regions, and the insurance industry pays out over $100m per fatality in North America, compared to $62,000 in Latin America (OK, insurance pays out for lots of things other than deaths, particularly property damage, but you get the point). disaster insurance lossesThe 2011 figures will look very different, once they include the insurance consequences of the Japanese earthquake and tsunami.

And not surprisingly, insurance companies are one of the business sectors most willing to talk, lobby and worry about climate change……

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Comments

One Response to “Natural and man-made disasters in 2010 – the insurance bill”
  1. After spending the first part of my career working for an insurance company at Lloyds of London, I can honestly say you’ve hit the nail on the head – Insurance companies do NOT care about loss of human life when natural disasters occur, they care about their bottom line, they are about the MONETARY loss.

    That said, insurance can be used as an effective tool in the fight against poverty and climate change. Look at the work done by Daniel Clark (http://www.stats.ox.ac.uk/~clarke/research.htm), using micro insurance to protect farmers in the world’s poorest regions. Or the work done by Parhelion Underwriting (http://www.parhelion.co.uk/), which uses insurance to de-risk projects in the renewable energy sector helping renewable energy projects, such as wind farms or solar pv projects, to be built which otherwise wouldn’t have been. So not all insurance companies are bad!

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