2012 half-year natural catastrophe review · natural disasters in the united states, 1980 – 2012...
TRANSCRIPT
2012 HALF-YEAR NATURAL
CATASTROPHE REVIEW
July 13, 2012
Questions and Answers
Welcome/Introduction
Terese Rosenthal
US Natural Catastrophe Update
Carl Hedde
Global Natural Catastrophe Update
Ernst Rauch
Economic Implications of Natural Catastrophe Losses
Dr. Robert Hartwig
Agenda
2
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
@iiiorg @lWorters
@MunichRe_US
Questions and Answers
Live Tweeting
#NATCAT2012
US NATURAL CATASTROPHE UPDATE
Carl Hedde, SVP, Head of Risk Accumulation
Munich Reinsurance America, Inc.
Source: FEMA
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 31,000
events
5
The Loss Database Today
MR NatCatSERVICE
One of the world‘s largest databases on natural catastrophes
© 2012 Munich Re
Thunderstorm (tornado-hail) activity accounts for the almost all US losses so far, and are estimated at US$ 8.8bn, the third most costly spring thunderstorm season in US history.
US Natural Catastrophes 2012 Headlines
US Natural Catastrophe Update
6 © 2012 Munich Re
Severe droughts now impacting central and southwest parts of country; Two major wildfires in Colorado in June caused record damage in the state from the peril, and the largest wildfire in New Mexico history occurred in May.
No significant, damaging earthquakes in US during first half of 2012.
Very mild winter over most of US causes only minor winter storm losses. Lack of heavy winter precipitation limited spring flooding but has exacerbated drought conditions.
Active early hurricane season; tropical storms Beryl and Debby caused minor wind damage and extensive flooding in Florida.
Insured losses in the United States during the first six months of 2012 totaled US$ 9.3bn – near the long-term average but well below the US$ 24.4bn seen in the first half of 2011 (in 2012 Dollars).
As of July 1, 2012
Number of
Events Fatalities
Estimated Overall
Losses (US $m)
Estimated Insured
Losses (US $m)
Severe
Thunderstorm 56 69 13,550 8,760
Winter Storm 3 3 80 38
Flood 6 0 12 Minor
Earthquake 1 0 0 0
Tropical Cyclone 2 1 100 50
Wildfire 22 6 875 500
Totals 90 79 14,617 9,348
Natural Disaster Losses in the United States, 2012
7 © 2012 Munich Re Source: MR NatCatSERVICE
US Natural Catastrophe Update
Natural Disasters in the United States, 1980 – 2012 Number of Events, January – June only
Meteorological events
(Storm)
Hydrological events
(Flood, mass
movement)
Climatological events
(Extreme temperature,
drought, forest fire)
Geophysical events
(Earthquake, tsunami,
volcanic eruption)
© 2012 Munich Re Source: MR NatCatSERVICE
1
61
6
22
20
40
60
80
100
120
1980 1982 1984 1986 1988 1990 1992 1994 1996 1998 2000 2002 2004 2006 2008 2010 2012
First Six Months 2012
90 Events
8
US Natural Catastrophe Update
Natural Disasters in the United States, 1980 – 2012 Number of Events (Annual Totals 1980 – 2011 vs. First Six Months 2012)
Meteorological events
(Storm)
Hydrological events
(Flood, mass
movement)
Climatological events
(Extreme temperature,
drought, forest fire)
Geophysical events
(Earthquake, tsunami,
volcanic eruption)
© 2012 Munich Re Source: MR NatCatSERVICE
1
61
6
22
50
100
150
200
250
300
1980 1982 1984 1986 1988 1990 1992 1994 1996 1998 2000 2002 2004 2006 2008 2010 2012
First Six Months 2012
90 Events
9
US Natural Catastrophe Update
50
100
150
200
1980 1982 1984 1986 1988 1990 1992 1994 1996 1998 2000 2002 2004 2006 2008 2010 2012
Losses Due to Natural Catastrophes in the United States 1980 – 2012 (Annual Totals 1980 – 2011 vs. First Six Months 2012)
Sources: MR NatCatSERVICE, Property Claims Services
Overall losses (in 2011 values) Insured losses (in 2011 values)
© 2012 Munich Re 10
Insured losses in the US totaled US$ 9.3bn.
US Natural Catastrophe Update
2012 US THUNDERSTORM SEASON
Source: NOAA/NWS
2012 US Tornado Count
12 © 2012 Munich Re Source: NOAA
US Natural Catastrophe Update
US Thunderstorm Loss Trends January – June Only, 1980 - 2012
Thunderstorm losses for the period January – June in 2012 much lower than 2011, but is still
the third worst spring thunderstorm season loss in history.
Sources: Property Claims Service, MR NatCatSERVICE 13 © 2012 Munich Re
First Six Months 2012
$8.8 bn
US Natural Catastrophe Update
US Thunderstorm Loss Trends Annual Totals 1980 – 2011 vs. First Six Months 2012
Average thunderstorm losses have increased over fivefold since 1980. It is likely that 2012
will be one of the top 5 worst thunderstorm losses of all time.
14 © 2012 Munich Re Sources: Property Claims Service, MR NatCatSERVICE
First Six Months 2012
$8.8 bn
US Natural Catastrophe Update
Source: Property Claims Service
MR NatCatSERVICE
Notable Thunderstorm Events First Six Months 2012
15 © 2012 Munich Re
Source: FEMA
Large hail event in St. Louis
metropolitan region. Hailstones up
to 2.75” in diameter. Over 200,000
claims for damage, US$ 1.0bn loss.
Over 170 tornadoes over Ohio and
Tennessee River valley regions.
Some small towns almost
completely destroyed. About
180,000 buildings damaged or
destroyed, US$ 2.4bn insured loss.
March 2-3
April 28-29
US Natural Catastrophe Update
OTHER US NATURAL CATASTROPHES IN 2012
Source: FEMA Source: NASA
Current US Drought Conditions
17 © 2012 Munich Re Source: National Drought Mitigation Center
US Natural Catastrophe Update
Number of Acres Burned in Wildfires, 1980 – 2012
Source: National Interagency Fire Center © 2012 Munich Re 18
First Six Months 2012
1.7 million acres
US Natural Catastrophe Update
Notable Wildfires in 2012
Source: FEMA
19 © 2012 Munich Re
Source: USFS
“Whitewater-Baldy” fire scorched over
278,000 acres over May and June,
becoming the largest wildfire in state
history, but with minimal insurance
impacts.
“High Park” fire near Fort Collins
destroyed 257 homes and “Waldo
Canyon” fire near Colorado Springs
destroyed over 300 homes, becoming
the most damaging fire in state
history. Insured losses from both fires
are estimated at US$ 500m.
Colorado
New Mexico
US Natural Catastrophe Update
Tropical Cyclones Impacting the United States First Six Months 2012
Source: NOAA 20 © 2012 Munich Re
Beryl
2012 was the first time
since 1908 that two
named storms occurred
in May (Alberto & Beryl)
Debby is the earliest 4th
named storm in the
Atlantic Historical
Record.
Debby
Tropical Cyclones
US Natural Catastrophe Update
US Tropical Cyclones in 2012 First Six Months 2012
Landfall on May 28 near Jacksonville,
Florida as a tropical storm with sustained
winds of 70mph; strongest May tropical
storm ever to make US landfall.
Minor wind damage and flooding in
Florida and Georgia.
Photo: FEMA
21 © 2012 Munich Re
Tropical Storm Beryl
Landfall on June 26 near Steinhatchee,
Florida as a tropical storm with sustained
winds of 40mph.
Torrential rains of up to 25” caused
extensive flooding in the Florida
Panhandle, with lesser flooding
elsewhere in the state.
Tropical Storm Debby
Sourc
e: N
AS
A
US Natural Catastrophe Update
There has not been a major hurricane landfall in the US since Wilma in 2005.
Number of US Landfalling Tropical Cyclones,
1900 - 2012
Source: NOAA 22 © 2012 Munich Re
US Natural Catastrophe Update
There has not been a major hurricane landfall in the US since Wilma in 2005.
Insured US Tropical Cyclone Losses, 1980 - 2012
Sources: Property Claims Service, MR NatCatSERVICE, NFIP 23 © 2012 Munich Re
First Six Months 2012 Total
US$ 50 million
US Natural Catastrophe Update
GLOBAL NATURAL CATASTROPHE UPDATE
Ernst Rauch
Head of Corporate Climate Center
Munich Re
Geophysical events
(earthquake, tsunami, volcanic activity)
Meteorological events
(storm)
Hydrological events
(flood, mass movement)
Selection of significant
loss events (see table)
Natural catastrophes
Climatological events
(extreme temperature, drought, wildfire)
Number of events: 450
Severe storms, tornadoes
USA, 2–4 March
Fatalities: 41
Severe storms
USA, 28–29 April
Earthquake
Mexico, 20 March
Cyclone Funso
Mozambique, 19–28 January
Fatalities: 46
Floods, flash floods
Australia, Feb–March
Floods, landslides
China, May–June
Fatalities: 127
Winter damage/avalanches
Afghanistan, Jan–March
Fatalities: 160
Cold wave
Eastern Europe, Jan–Feb
Fatalities: 745
Earthquake
Italy, 20/29 May
Fatalities: 18
Winter Storm Andrea
Europe, 5–6 January
© 2012 Munich Re Source: MR NatCatSERVICE 25
Global Natural Catastrophe Update
Natural Catastrophes January – June 2012 World map
Natural Catastrophes Worldwide 2012 Overview and Comparison with Previous Years
© 2012 Munich Re 26
Global Natural Catastrophe Update
Source: MR NatCatSERVICE
2012
(Jan – June)
Number of events 450
Overall losses in
US$m
(original values)
26,000
Insured losses in
US$m
(original values)
12,000
Fatalities 3,500
© 2012 Munich Re 27
Natural Catastrophes Worldwide 2012 Overview and Comparison with Previous Years
Global Natural Catastrophe Update
2012
(Jan – June)
2011
(Jan – June)
Number of events 450 405
Overall losses in
US$m
(original values)
26,000 302,000
Insured losses in
US$m
(original values)
12,000 81,700
Fatalities 3,500 20,200
Source: MR NatCatSERVICE
© 2012 Munich Re 28
Natural Catastrophes Worldwide 2012 Overview and Comparison with Previous Years
Global Natural Catastrophe Update
2012
(Jan – June)
2011
(Jan – June)
Average of
the last 10
years
2002-2011
(Jan –June)
Number of events 450 405 395
Overall losses in
US$m
(original values)
26,000 302,000 75,600
Insured losses in
US$m
(original values)
12,000 81,700 19,200
Fatalities 3,500 20,200 53,000
Source: MR NatCatSERVICE
© 2012 Munich Re 29
Natural Catastrophes Worldwide 2012 Overview and Comparison with Previous Years
Global Natural Catastrophe Update
2012
(Jan – June)
2011
(Jan – June)
Average of
the last 10
years
2002-2011
(Jan –June)
Average of
the last 30
years
1982-2011
(Jan –June)
Number of events 450 405 395 320
Overall losses in
US$m
(original values)
26,000 302,000 75,600 43,300
Insured losses in
US$m
(original values)
12,000 81,700 19,200 10,200
Fatalities 3,500 20,200 53,000 40,000
Source: MR NatCatSERVICE
© 2012 Munich Re 30
2012
(Jan – June)
2011
(Jan – June)
Average of
the last 10
years
2002-2011
(Jan –June)
Average of
the last 30
years
1982-2011
(Jan –June)
Top Year
1982 -2011
(Jan – June)
Number of events 450 405 395 320 2007
520
Overall losses in
US$m
(original values)
26,000 302,000 75,600 43,300 2011
(EQ Japan)
302,000
Insured losses in
US$m
(original values)
12,000 81,700 19,200 10,200 2011
(EQ, Japan)
82,000
Fatalities 3,500 20,200 53,000 40,000 2010
(EQ Haiti)
230,000
Natural Catastrophes Worldwide 2012 Overview and Comparison with Previous Years
Global Natural Catastrophe Update
Source: MR NatCatSERVICE
Meteorological events
(Storm)
Hydrological events
(Flood, mass
movement)
Climatological events
(Extreme temperature,
drought, forest fire)
Geophysical events
(Earthquake, tsunami,
volcanic eruption)
Natural Catastrophes Worldwide 1980 – 2012 Number of Events (Annual Totals 1980 – 2011 vs. First Six Months 2012)
Number
Source: MR NatCatSERVICE © 2012 Munich Re 31
200
400
600
800
1 000
1 200
1980 1982 1984 1986 1988 1990 1992 1994 1996 1998 2000 2002 2004 2006 2008 2010 2012
First Six Months in 2012
450 Events
Global Natural Catastrophe Update
Natural Catastrophes Worldwide 1980 – 2012 Overall and Insured Losses (Annual Totals 1980 – 2011 vs. First Six Months 2012)
(bn US$)
Overall losses (in 2011 values) Insured losses (in 2011 values)
Overall losses totaled US$ 26bn; Insured losses totaled US$ 12bn
© 2012 Munich Re 32 Source: MR NatCatSERVICE
50
100
150
200
250
300
350
400
1980 1982 1984 1986 1988 1990 1992 1994 1996 1998 2000 2002 2004 2006 2008 2010 2012
Global Natural Catastrophe Update
Insured losses US$
1980 – 2011 (annual totals): 870bn* *losses in 2011 values
2012 (first six months): 12bn
Natural Catastrophes: Comparison of Insured Losses Percentage Distribution - Annual Totals 1980 – 2011 vs. First Six Months 2012
<1%
<1%
65%
5%
13%
17%
2%
85%
10%
2%
© 2012 Munich Re Source: MR NatCatSERVICE 33
Global Natural Catastrophe Update
Natural Catastrophes Worldwide 2012 The Five Costliest Natural Catastrophes for the Insurance Industry
Date Region Event Fatalities
Overall
losses
US$ m
Insured
losses
US$ m
2-4.3.2012 U.S. Severe storm,
tornadoes (PCS 67) 41 4,000 2,350
28-29.4.2012 U.S. Severe storm,
tornadoes (PCS 74) 1 2,000 1,025
13-15.4.2012 U.S. Severe storm,
tornadoes (PCS 72) 6 1,800 910
25-30.5.2012 U.S. Severe storm,
tornadoes (PCS 76) - 1,600 850
6-7.6.2012 U.S. Severe storm,
tornadoes (PCS 77) - 1,500 750
Source: PCS - Property Claim Services © 2012 Munich Re 34
Global Natural Catastrophe Update
Costliest Natural Catastrophes Since 1950 Rank by Insured Losses
Year Event Region Insured loss US$m
(in original values)
2005 Hurricane Katrina USA 62,200
2011 EQ, tsunami Japan 35-40,000
2008 Hurricane Ike USA, Caribbean 18,500
1992 Hurricane Andrew USA 17,000
1994 EQ Northridge USA 15,300
2004 Hurricane Ivan USA, Caribbean 13,800
2011 EQ Christchurch New Zealand 13,000
2005 Hurricane Wilma USA, Mexico 12,500
2005 Hurricane Rita USA 12,100
2011 Floods Thailand 10,000
35 © 2012 Munich Re Source: MR NatCatSERVICE
Global Natural Catastrophe Update
National Climate Data Center of NOAA State of the Climate Global Analysis May 2012
Source: NOAA © 2012 Munich Re 36
Global Natural Catastrophe Update
National Climate Data Center of NOAA State of the Climate Global Analysis May 2012
Spain experienced its fourth warmest May since national records began in 1960, with a
nationally-averaged temperature that was 2.7°C (4.9°F) above average. Eleven stations
across different regions of Spain observed their highest May temperatures on records.
Source: Reuters
Source: Agencia Estatal de Meteorologá © 2012 Munich Re
(Periodo de Referencia: 1971-2000)
37
Global Natural Catastrophe Update
Natural Catastrophes Worldwide 2012
Summary
The first half year is below the average in terms of fatalities, overall and insured losses.
Significant natural catastrophes occurred mainly in the US, with insured losses up to
US$ 9.3bn.
Especially wild fires are burning in the US and Spain.
91% of all registered disasters are weather-related events.
The Northern Hemisphere land and ocean surface temperature for May 2012 was the all time
warmest May on record, starting in 1880.
© 2012 Munich Re 38 Source: MR NatCatSERVICE
No significant earthquakes occurred in the first six months on the global scale.
Global Natural Catastrophe Update
Market and Financial Impact Catastrophe Losses
First Half 2012
Insurance Information Institute
July 13, 2012
Robert P. Hartwig, Ph.D., CPCU, President & Economist
Insurance Information Institute 110 William Street New York, NY 10038
Tel: 212.346.5520 Cell: 917.453.1885 [email protected] www.iii.org
40
2012: Severe Weather Activity Is Running Well Below 2011
Economic and Insured Losses Remain High
41
1,1
33
1,1
32 1
,29
7
1,1
73
1,0
82 1
,23
4
1,1
73
1,1
48
1,4
24
1,3
45
1,0
71 1,2
16
94
1
1,3
76
1,2
64
1,1
03
1,0
98
1,6
92
1,1
46 1,2
82
87
2
1,819
1,6
91
553
0
200
400
600
800
1,000
1,200
1,400
1,600
1,800
2,000
90 91 92 93 94 95 96 97 98 99 00 01 02 03 04 05 06 07 08 09 10 11 12*
Nu
mb
er
of
To
rna
do
es
0
100
200
300
400
500
600
Nu
mb
er o
f De
ath
s
Number of Tornadoes
Number of Deaths
*Through July 4, 2012. Source: U.S. Department of Commerce, Storm Prediction Center, National Weather Service at http://www.spc.noaa.gov/climo/online/monthly/newm.html
Number of Tornadoes and Related Deaths, 1990 – 2012*
Tornadoes claimed 553 lives in 2011, the most since 1925
872 tornadoes have been recorded so
far this year*
2012 Tornado Losses Got Off to an Ominous Beginning, but Slowed. First Half 2011 Insured Losses from Tornadoes and Thunderstorms Topped $21B.
U.S. Tornado Count, 2005-2012*
42
*Through July 9, 2012. Source: http://www.spc.noaa.gov/wcm/
There were 1,897 tornadoes in the US in 2011 far above
average, but well below 2008’s record
2012 count is running well behind 2011
June 29, 2012 Derecho: Traveled 600 Miles from Midwest to Mid-Atlantic
43 Source: National Weather Service: http://www.spc.noaa.gov/wcm/2012/20120629-derecho.png
The June 29 derecho traveled
600 miles in just 10 hours—an average speed of 60 MPH! Peak wind gusts
80-100 MPH.
Millions of people were without power
in sweltering heat for days, particularly in Mid-Atlantic states
10-HOUR RADAR COMPOSITE (2PM – MIDNIGHT)
Location of Tornadoes in the US, 2012*
*Through July 4, 2012.
Source: NOAA Storm Prediction Center; http://www.spc.noaa.gov/climo/online/monthly/2012_annual_summary.html# 44
874 tornadoes killed 68 people through
July 4
Location of Large Hail Reports in the US, 2012*
45
*Through July 4, 2012.
Source: NOAA Storm Prediction Center; http://www.spc.noaa.gov/climo/online/monthly/2012_annual_summary.html#
There were 5,452 “Large Hail”
reports through July 4, 2012,
causing extensive damage to homes,
businesses and vehicles
Location of Wind Damage Reports in the US, 2012*
46
*Through July 4, 2012.
Source: NOAA Storm Prediction Center; http://www.spc.noaa.gov/climo/online/monthly/2012_annual_summary.html#
There were 6,851 “Wind Damage” reports through July 4, causing
extensive damage to homes and,
businesses
Severe Weather Reports, 2012*
47 *Through July 4, 2012.
Source: NOAA Storm Prediction Center; http://www.spc.noaa.gov/climo/online/monthly/2012_annual_summary.html#
There were already 13,177 severe weather reports through
July 4; including 874
tornadoes; 5,452 “Large Hail” reports
and 6,851 high wind events
Severe Weather Reports, 2011
48 Source: NOAA Storm Prediction Center; http://www.spc.noaa.gov/climo/online/monthly/2011_annual_summary.html#
There were 29,996 severe
weather reports in 2011;
including 1,894 tornadoes;
9,417 “Large Hail” reports
and 18,685 high wind events
49
$1
2.3
$1
0.7
$3
.7
$1
4.0
$1
1.3
$6
.0
$3
3.9
$7
.4
$1
5.9
$3
2.9
$7
1.7
$1
0.3
$7
.3
$2
8.5
$1
1.2
$1
4.1
$3
2.3
$3
.4
$1
3.7
$4
.7
$7
.8
$3
6.9
$8
.6
$2
5.8
$0
$10
$20
$30
$40
$50
$60
$70
$80
89 90 91 92 93 94 95 96 97 98 99 00 01 02 03 04 05 06 07 08 09 10 11 12*
US Insured Catastrophe Losses
*PCS figure for Q1 2012.
Note: 2001 figure includes $20.3B for 9/11 losses reported through 12/31/01 ($25.9B 2011 dollars). Includes only business and personal property claims, business interruption and auto claims. Non-prop/BI losses = $12.2B ($15.6B in 2011 dollars.)
Sources: Property Claims Service/ISO; Insurance Information Institute.
US CAT Losses in 2011 Were the 5th Highest in US History on An Inflation-
Adjusted Basis
Q1 2012 CAT losses were up $1.2B or 55% from $2.2B in Q1 2011
Record Tornado Losses Caused
2011 CAT Losses to Surge
($ Billions, 2011 Dollars)
49
50
Top 14 Most Costly Disasters in 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)
Spring
Tornadoes
& Storms*
(2011)
9/11
Attack
(2001)
Andrew
(1992)
Katrina
(2005)
Taken as a single event, the Spring 2011 tornado and storm season was
the 4th costliest event in US insurance history
Hurricane Irene became the 11th most expense
hurricane in US history
51
Federal Disaster Declarations Patterns: 1953-2012
2012 Declarations Running Well Below Record 2011/2010 Pace
Number of Federal Disaster Declarations, 1953-2012*
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 2
54
22
31
52
42
13
42
7 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
91
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
12
*Through July 12, 2012.
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 New Records in 2010 and 2011, though 2012 Pace Is Well Below Prior Two Years
The number of federal disaster declarations set a
new record in 2011, with 99, shattering 2010’s record 81
declarations.
There have been 2,064 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.
19 federal disasters were declared through
July 12, 2012
52
53
Federal Disasters Declarations by State, 1953 – 2012: Highest 25 States*
86
78
71
65
64
58
56
56
53
53
51
51
50
48
48
48
48
47
47
45
45
45
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 TN MS IA MN WV KS NE PA OH VA WA ND NC IN
Dis
as
ter
De
cla
rati
on
s
*Through July 12, 2012.
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 – 2012: Lowest 25 States*
39
39
37
36
35
34
33
29
28
27
26
26
25
24
24
23
22
21
17
17
17
15
14
11
10
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 UT RI WY
Dis
as
ter
De
cla
rati
on
s
*Through July 12, 2012. 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, Utah and Rhode Island had the fewest
number of Federal Disaster Declarations
55
P/C Insurance Industry Financial Overview
Profitability Recovery in 2012 (and Setback in 2011) Were
Largely Associated With Catastrophe Activity
P/C Net Income After Taxes 1991–2012:Q1 ($ 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
5,2
04
$1
9,1
50
$1
0,1
41
$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 12:Q1
2005 ROE*= 9.6%
2006 ROE = 12.7%
2007 ROE = 10.9%
2008 ROE = 0.1%
2009 ROE = 5.0%
2010 ROE = 6.6%
2011 ROAS1 = 3.5%
2012:Q1 ROAS1 = 7.2%
P-C Industry 2012:Q1 profits were up 29% from 2011:Q1, due
primarily to lower catastrophe losses
* ROE figures are GAAP; 1Return on avg. surplus. Excluding Mortgage & Financial Guaranty insurers yields a 8.2% ROAS for 2012:Q1, 4.6% ROAS for 2011, 7.6% for 2010 and 7.4% for 2009.
Sources: A.M. Best, ISO, Insurance Information Institute 56
A 100 Combined Ratio Isn’t What It Once Was: Investment Impact on ROEs
Combined Ratio / ROE
* 2008 -2012 figures are return on average surplus and exclude mortgage and financial guaranty insurers. 2012:Q1 combined ratio including M&FG insurers is 99.0, ROAS = 7.2%; 2011 combined ratio including M&FG insurers is 108.2, ROAS = 3.5%.
Source: Insurance Information Institute from A.M. Best and ISO data.
97.5
100.6 100.1 100.8
92.7
101.099.3
100.9
97.6
106.4
95.78.2%
4.6%
7.6%7.4%
4.4%
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 2012:Q1
0%
3%
6%
9%
12%
15%
18%
Combined Ratio ROE*
Combined Ratios Must Be Lower in Today’s Depressed Investment Environment to Generate Risk Appropriate ROEs
A combined ratio of about 100 generates an ROE of ~6.7% in 2012, ~7.5% ROE in 2009/10,
10% in 2005 and 16% in 1979
Year Ago
2011:Q1 = 102.2, 6.1% ROE
57
-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
*1
2:
Profitability Peaks & Troughs in the P/C Insurance Industry, 1975 – 2012:Q1*
*Profitability = P/C insurer ROEs. 2011 figure is an estimate based on ROAS data. Note: Data for 2008-2012 exclude
mortgage and financial guaranty insurers. 2012:Q1 ROAS = 7.2% 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%
9 Years
2011:
4.6%*
History suggests next ROE
peak will be in 2016-2017
ROE
1975: 2.4%
2012:Q8.2%
58
59
-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
12
Premium Growth Is Up Modestly: More in 2012?
(Percent)
1975-78 1984-87 2000-03
Shaded areas denote “hard market” periods Sources: 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.
2012:Q1 growth
was +3.1%
60
P/C Net Premiums Written: % Change, Quarter vs. Year-Prior Quarter
Sources: ISO, Insurance Information Institute.
The return to positive premium growth in part reflects pressure on property lines due to elevated catastrophe losses
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% 1
3.4
%
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
%
1.7
% 3.5
%
1.6
% 4.1
%
3.8
%
3.1
%
-10%
-5%
0%
5%
10%
15%
20%
2002:Q
1
2002:Q
2
2002:Q
3
2002:Q
4
2003:Q
1
2003:Q
2
2003:Q
3
2003:Q
4
2004:Q
1
2004:Q
2
2004:Q
3
2004:Q
4
2005:Q
1
2005:Q
2
2005:Q
3
2005:Q
4
2006:Q
1
2006:Q
2
2006:Q
3
2006:Q
4
2007:Q
1
2007:Q
2
2007:Q
3
2007:Q
4
2008:Q
1
2008:Q
2
2008:Q
3
2008:Q
4
2009:Q
1
2009:Q
2
2009:Q
3
2009:Q
4
2010:Q
1
2010:Q
2
2010:Q
3
2010:Q
4
2011:Q
1
2011:Q
2
2011:Q
3
2011:Q
4
2012:Q
1
In early 2012 premium growth appeared to
decelerate
61
Average Commercial Rate Change, All Lines, (1Q:2004–1Q:2012)
-3.2
%
-5.9
%
-7.0
%
-9.4
%
-9.7
%
-8.2
%
-4.6
% -2.7
%
-3.0
%
-5.3
%
-9.6
%
-11
.3%
-11
.8%
-13
.3%
-12
.0%
-13
.5%
-12
.9%
-11
.0%
-6.4
%
-5.1
%
-4.9
%
-5.8
%
-5.6
%
-5.3
%
-6.4
%
-5.2
%
-5.4
% -2.9
%
2.7
% 4.4
%
-0.1
% 0.9
%
-0.1
%
-16%
-11%
-6%
-1%
4%
9%
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
1Q
12
Source: Council of Insurance Agents & Brokers (1Q04-4Q11); Insurance Information Institute
KRW Effect
Pricing as of Q1:2012 was positive for only the third time since 2003. Slightly
stronger gains in Q4.
(Percent)
Q2 2011 marked the 30th
consecutive quarter of price
declines
62
Change in Commercial Rate Renewals, by Account Size: 1999:Q4 to 2012:Q1
Source: Council of Insurance Agents and Brokers; Barclay’s Capital; Insurance Information Institute.
Percentage Change (%)
Trough = 2007:Q3 -13.6%
Pricing Turned Negative in Early
2004 and Remained that
way for 7 ½ years
Peak = 2001:Q4 +28.5%
KRW : No Lasting Impact
Pricing turned positive in Q3:2011, the first increase in
nearly 8 years; Q1:2012 renewals were up 4.4%
63
Cumulative Qtrly. Commercial Rate Changes, by Account Size: 1999:Q4 to 2012:Q1
1999:Q4 = 100
Source: Council of Insurance Agents and Brokers; Barclay’s Capital; Insurance Information Institute.
Despite 3 consecutive quarters of gains
(Q1:2012 = 4.4%), pricing today is where is was in
early 2001 (pre-9/11)
Upward pricing pressure is small for large accounts, 4.1% in
Q1:2012, vs. 4.2% for small accounts and 4.9%
for medium accounts
64
Change in Commercial Rate Renewals, by Line: 2012:Q1
Source: Council of Insurance Agents and Brokers; Insurance Information Institute.
Major Commercial Lines Renewed Uniformly Upward in Q1:2012 for Only the Third Time Since 2003; Property Lines
& Workers Comp Leading the Way
Percentage Change (%)
3.8% 4.0% 4.0%
6.5%
7.4%
0.8%
2.0%
3.1% 3.1% 3.3%3.6%
0.0%
1.0%
2.0%
3.0%
4.0%
5.0%
6.0%
7.0%
8.0%
Su
rety
EP
L
Co
mm
l A
uto
Ge
ne
ral
Lia
bili
ty
Um
bre
lla
D&
O
Co
nstr
uctio
n
EP
L
Bu
s.
Inte
rru
ptio
n
Co
mm
erc
ial
Pro
pe
rty
Wo
rke
rs
Co
mp
Workers Comp rate increases are large than any other line, followed
by Property lines
UNDERWRITING
65
Catastrophes Will Lead Insurers their Largest
Underwriting Loss in a Decade
66
P/C Insurance Industry Combined Ratio, 2001–2011*
* Excludes Mortgage & Financial Guaranty insurers 2008--2011. Including M&FG, 2008=105.1, 2009=100.7, 2010=102.4, 2011=106.4
Sources: A.M. Best, ISO.
95.7
99.3100.8
106.4
101.0
92.6
100.8
98.4100.1
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: 1990–2012F
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
12
3.7
10
5.0
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 11E12F
Homeowners Performance Deteriorated in 2011 Due to Large Cat Losses. Extreme Regional Variation Can Be
Expected Due to Local Catastrophe Loss Activity
Sources: A.M. Best (1990-2012E); Insurance Information Institute.
67
Underwriting Gain (Loss) 1975–2012:Q1*
* Includes mortgage and financial guaranty insurers in all years
Sources: A.M. Best, ISO; Insurance Information Institute.
Large Underwriting Losses Are NOT Sustainable in Current Investment Environment; 2012:Q1 Underwriting Loss Was -0.2 Bill.
-$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 10 11 12
Cumulative underwriting deficit from 1975 through
2011 is $479B
($ Billions) Underwriting losses in
2011 totaled
$36.5B, the largest since
2001
68
69
Combined Ratio Points Associated with Catastrophe Losses: 1960 – 2011*
*Insurance Information Institute estimates for 2010 and 2011 based on A.M. Best data.
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
1.42
.01
.32
.00
.50
.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
4.4
8.0
3.6
0.9
0.1
1.1
1.1
0.8
0
1
2
3
4
5
6
7
8
9
10
19
60
19
62
19
64
19
66
19
68
19
70
19
72
19
74
19
76
19
78
19
80
19
82
19
84
19
86
19
88
19
90
19
92
19
94
19
96
19
98
20
00
20
02
20
04
20
06
20
08
20
10
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: 6.20*
Combined Ratio Points
Financial Strength & Underwriting
70
Cyclical Pattern in P-C Impairment History is Directly Tied to
Underwriting, Reserving & Pricing
P/C Insurer Impairments, 1969–2011 8
15
12
71
19
33
91
31
21
99
15
14
14
36
50
30 3
34
8 49
55
60
59
41
28
16
12
32
17 2
04
8 49
47
37
19
13 1
6
16 1
9 21
34
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
11
Source: A.M. Best Special Report “1969-2011 Impairment Review,” June 2012; 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.
71
72
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 Are By 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 Growth Alleged Fraud
Catastrophe Losses
Affiliate Impairment
Investment Problems (Overstatement of Assets)
Misc.
Sig. Change in Business
SURPLUS/CAPITAL/CAPACITY
73
Have Large Global Losses Reduced Capacity in the Industry, Setting
the Stage for a Market Turn?
74
Policyholder Surplus, 2006:Q4–2012:Q1
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
$559.2 $559.1
$538.6
$550.3
$570.7$566.5
$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 11:Q4 12:Q1
2011:Q1 Previous Surplus Peak
Quarterly Surplus Changes Since 2011:Q1 Peak
11:Q2: -$7.4B (-1.0%)
11:Q3: -$27.9B (-4.6%)
11:Q4: -$16.2B (-2.5%)
12:Q1: +$3.2B (+0.7%)
Surplus as of 3/31/12 hit an all time record high of $570.7B, 0.7% or $3.2B
above the previous record set as of 3/31/11.
*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 $0.80 of NPW, close to the strongest claims-
paying status in its history.
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Contents
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Perils, Risks and Insurance
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