New Report from AIR Worldwide Puts Recent Catastrophe Losses in Perspective

  New Report from AIR Worldwide Puts Recent Catastrophe Losses in Perspective

Business Wire

BOSTON -- January 16, 2013

In 2011, insured losses from global natural catastrophes exceeded USD 110
billion according to industry sources, the second-highest figure ever
recorded. A new report from catastrophe modeling firm AIR Worldwide reveals
that there is nearly a 7 percent probability that the global insurance
industry will experience this loss level or greater in any given year
(translating to a 15-year return period loss).

AIR’s report titled Taking a Comprehensive View of Catastrophe Risk Worldwide
not only puts the 2011 losses in perspective but also examines scenarios that
could result in much larger worldwide insurance losses. For example, AIR
estimates that the 1 percent exceedance probability loss (or the 100-year
return period loss) is just over USD 200 billion — a figure that could be
driven by an active and severe U.S. hurricane season or by a combination of
different perils in different regions, as was the case in 2011. AIR estimates
the average annual loss (AAL) from natural catastrophes is USD 59 billion, in
line with global catastrophes losses from 2012, which are estimated to be
around USD 58 billion. Those estimates are based on perils and regions
currently modeled by AIR.

“Many in the industry were surprised at the aggregation of losses in 2011,
especially since we didn’t have a major U.S. hurricane,” said Bill Churney,
senior vice president, AIR Worldwide. “However, AIR’s models incorporate years
with losses much greater than what we experienced in 2011. This is the real
value of having a credible catastrophe model — to fully anticipate possible
outcomes, including future catastrophes and future years that will produce
losses exceeding any historical amounts.”

The natural catastrophes of 2011, including the Tohoku earthquake in Japan,
flooding in Thailand, earthquakes in New Zealand, and a record-breaking severe
thunderstorm season in the United States, resulted in USD 110 billion in
insured losses as reported by Swiss Re — making it the second-highest figure
ever recorded from global natural catastrophes.

“Despite the significance of the toll in 2011, insured losses fell well within
the range for which global insurers and reinsurers should be prepared,”
continued Churney. “It’s our hope that the report will help companies
increasingly concerned about escalating levels of loss to better understand
and own their risk.”

The events of 2011 prompted the industry to consider some basic questions,
which AIR’s new report explores, such as: How frequent are loss years like
2011? And are natural catastrophe events becoming more frequent and/or more
severe?

AIR is in a unique position to provide guidance with respect to those
questions. AIR develops and maintains detailed databases of insured properties
for each modeled country. The databases serve as the foundation for all
modeled industry loss estimates. Second, AIR takes a unique approach to
generating the catalogs of simulated events in its software that makes it easy
for the user to determine the probability of various levels of loss for
individual events, such as the Tohoku earthquake, or for whole years of
catastrophe activity. Finally, AIR models the risk from natural catastrophes
in more than 90 countries, which gives it a global perspective. For example,
AIR models covered perils and regions accounting for more than 80 percent of
insured losses from natural catastrophes worldwide in 2011.

“AIR’s approach of simulating potential years of activity has long enabled
companies to look at their global risk on an aggregate basis,” concluded
Churney. “We thought the industry would benefit by sharing such pertinent loss
information.”

A full version of this report can be found on AIR Worldwide’s website at:
http://www.air-worldwide.com/Publications/AIR-Currents/2012/attachments/Taking-A-Comprehensive-View-of-Catastrophe-Risk-Worldwide/

About AIR Worldwide

AIR Worldwide (AIR) is the scientific leader and most respected provider of
risk modeling software and consulting services. AIR founded the catastrophe
modeling industry in 1987 and today models the risk from natural catastrophes
and terrorism in more than 90 countries. More than 400 insurance, reinsurance,
financial, corporate, and government clients rely on AIR software and services
for catastrophe risk management, insurance-linked securities, detailed
site-specific wind and seismic engineering analyses, and agricultural risk
management. AIR is a member of the Verisk Insurance Solutions group at Verisk
Analytics (Nasdaq:VRSK) and is headquartered in Boston with additional offices
in North America, Europe, and Asia. For more information, please visit
www.air-worldwide.com.

Contact:

AIR Worldwide
Kevin Long, 617-267-6645
klong@air-worldwide.com
 
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