Climate change impacting reinsurers' bottom lines
The Camp Fire wildfire in northern California was the costliest natural catastrophe event in 2018, with overall losses of $16.5 billion and insured losses of $12.5 billion, according to Munich Re's Natural Catastrophe Review 2018.
This same report suggested there are clear indications of the influence that man-made climate change has had on the wildfires in California, which has caused billions of losses in both 2018 and 2017.
“2018 saw several major natural catastrophes with high insured losses. These included the unusual phenomenon of severe tropical cyclones occurring both in the US and Japan while autumn wildfires devastated parts of California. Such massive wildfires appear to be occurring more frequently as a result of climate change," said Munich Re board member Torsten Jeworrek.
In autumn of 2018, California experienced the most damaging wildfires in recorded US history. Camp Fire in November more or less completely destroyed the small town of Paradise in the foothills of the Sierra Nevada about 140 km north of Sacramento. Drought and strong winds helped to fuel the fire, and hilly terrain and limited access routes made it more difficult to put the fire out.
The Woolsey Fire, which broke out in the Los Angeles area at a similar time destroyed around 1,600 homes - and due to their high value - created overall losses of $5.2bn, with around $4bn in insured losses.
All in all, wildfires in California contributed losses totalling $ 24bn to the overall 2018 nat cat loss burden, with $18bn of this insured.
Jeworrek continued: "Action is urgently needed on building codes and land use to help prevent losses. Given the greater frequency of unusual loss events and the possible links between them, insurers need to examine whether the events of 2018 were already on their models’ radar or whether they need to realign their risk management and underwriting strategies.”
Overall natural catastrophe losses in 2018 hit $160 billion, above the inflation adjusted average for the last 30 years ($140bn). 2017 losses totalled $350 billion by comparison, and were due mainly to record hurricane losses.
Hurricane Michael was the second costliest event in 2018, with overall losses of $16 billion and insured losses of $10 billion.