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Munchener Ruckversicherungs-Gesellschaft — Munich Re — Munich Re / Insurance Information Institute Nat Cat Webinar (January 2015)
71 slides from Munchener Ruckversicherungs-Gesellschaft's conference presentation, Jan 7, 2015
Slide 1: NAT CATS 2014: What's going on with the weather?
NAT CATS 2014: What's going on with the weather? January 7, 2015
Slide 2: Agenda
Agenda Introduction Sharon Cooper Press Spokesperson, Munich Re America US/Global Natural Catastrophe Update Carl Hedde Head of Risk Accumulation, Munich Re America Special Topic: Heavy downpours. Severe droughts. What's going on with the weather? Ernst Rauch Head of Corporate Climate Centre, Munich
Slide 3: Global & US Natural Catastrophes in 2014
Global & US Natural Catastrophes in 2014 Carl Hedde, Head of Risk Accumulation Munich Reinsurance America, Inc.
Slide 4: MR NatCatSERVICE: The world's largest database on natural catastrophes
MR NatCatSERVICE The world‘s largest database on natural catastrophes The Loss Database Today 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 st
Slide 5: NatCatSERVICE Downloadcenter
NatCatSERVICE Downloadcenter for statistics and analyses on natural disasters The downloadcenter provides free access: Annual statistics Long-term statistics Information on significant natural disasters Focus analyses NatCatSERVICE methodology, info brochure Publication Topics Geo 500% O
Slide 6: US Natural Catastrophe Update: US Headlines
US Natural Catastrophe Update Natural disaster losses in 2014 US Headlines Insured losses in the United States in 2014 totaled $15.3 billion – far below the 2000 to 2013 average loss of $29 billion. Despite late onset of tornado season, insured thunderstorm losses exceeded $12.3 billion, the fou
Slide 7: Natural disaster losses in the US 2014
US Natural Catastrophe Update Natural disaster losses in the US 2014 Based on perils Number of Estimated Overall Losses Estimated Insured Losses As of January, 2015 Events Fatalities (US $m) (US $m) Severe 62 98 17,000 12,300 Thunderstorm Winter Storm, winter damage, cold wave, snow 13 115 3,700 2,3
Slide 8: American Canyon (Napa) Earthquake
US Natural Catastrophe Update American Canyon (Napa) Earthquake August 24: Despite being only a moderate earthquake, its shallow depth allowed for strong ground shaking in the immediate region, particularly on soft soils. Although structural damage was primarily limited to older masonry buildings an
Slide 9: Extreme precipitation events in the US, 2014
US Natural Catastrophe Update Extreme precipitation events in the US, 2014 Pensacola, Florida: 20” of rain over April 29 & 30 Detroit, Michigan: 4-6” of rain in in a 4-hour period on August 11. Islip, New York: 13” of rain in a single day on August 13. Phoenix, Arizona: 4-5” of rain on Septe
Slide 10: Current US drought conditions
US Natural Catastrophe Update Current US drought conditions As of December 30, 2014 Source: The National Drought Mitigation Center © 2015 Munich Re 10
Slide 11: Global Natural Catastrophe Update: Global Headlines
Global Natural Catastrophe Update Natural disaster losses in 2014 Global Headlines In 2014, losses from natural catastrophes summed up to US$ 110bn for direct economic losses and US$ 31bn for insured losses, both well below the average of the last 10 years (US$ 190 bn/US$ 58 bn). No single natur
Slide 12: Loss events worldwide 2014
Global Natural Catastrophe Update Loss events worldwide 2014 Overview and comparison with previous years 2014 2013 Average of the Average of the Top Year last 10 years last 30 years 1984 -2013 2004-2013 1984-2013 (Losses adjusted (Losses adjusted to inflation to inflation based on country CPI) based
Slide 13: Notable Global Events: India Cyclone Hudhud
Global Natural Catastrophe Update Notable Global Events 2014 India: Cyclone Huhhud made landfall as a powerful Saffir-Simpson category 4 hurricane on October 12. Over 80,000 buildings were damaged during the storm, along with severe agricultural and infrastructure damage. Economic losses from the cy
Slide 14: Notable Global Events: Eastern Europe floods
Global Natural Catastrophe Update Notable Global Events 2014 Eastern Europe: Torrential rains over two weeks in May produced some of the worst flooding on record in the Serbia, Bosnia and Herzegovina, and Croatia. Over 100,000 buildings were damaged or destroyed by the flooding, and several villages
Slide 15: Notable Global Events: Brazil drought
Global Natural Catastrophe Update Notable Global Events 2014 Brazil: Over the course of 2014, southeastern Brazil entered one of its worst droughts in history. Over 27 million people were affected by the drought, which brought heat waves and severe losses to water-intensive crops, like sugar cane. E
Slide 16: Special topic: Heavy downpours. Severe droughts.
Special topic: Heavy downpours. Severe droughts. What's going on with the weather? Ernst Rauch Head of Corporate Climate Centre, Munich Re
Slide 17: Events in 2014 with too much rain or too little rain
Events in 2014 with “too much rain” or “too little rain” Examples: Global and US Heavy precipitation and inundation in Europe/Balkan region in April-May (EU- flooding events already in 2002, 2013) Drought in South America/Brazil Several heavy precipitation events in large US population centers, incl
Slide 18: 2014 Precipitation anomalies in Europe and South America
2014 Precipitation anomalies in Europe and South America Flooding in the Balkan region; Drought in Brazil Sep – Nov 2014 Source: CPC/NOAA, 2014 Percent of normal precipitation Source: IRI/Columbia University, 2014 April 2014 © 2015 Munich Re 18
Slide 19: 2012–2014 precipitation anomalies in the Western US
2012 – 2014 precipitation anomalies in the Western US Current severe precipitation deficit in California: no long-term trend observed Last 2 years: 21 Dec 2012 – 20 Dec 2014 Significant annual variability in California winter precipitation (November – April) since 1895. Source: Western Regional Clim
Slide 20: Summer and winter temperatures in California since 1895
Summer and winter temperatures in California since 1895 Substantial increase contributed to the drought through elevated evapotranspiration Source: National Climatic Data Center, 2014 Source: National Climatic Data Center, 2014 Although the lack of precipitation in California over recent years has t
Slide 21: California Palmer Drought Severity Index (PDSI)
California Palmer Drought Severity Index (PDSI) Record low index value for 24 month period since 1895 PDSI: parameter measuring dryness based on precipitation and temperature, developed by US meteorologist Wayne Palmer in 1965. Source: National Climatic Data Center, 2014 © 2015 Munich Re 21
Slide 22: Global Natural Climate Variability in December 2014
Global Natural Climate Variability in December 2014 Transition from neutral ENSO to El Niño conditions expected to continue Along the equator Central and East Pacific waters get warmer, convective clouds and rainfall follow change in warm pool. Trade winds from easterly directions vanish or even rev
Slide 23: December 2014 precipitation anomalies in the Western US
December 2014 precipitation anomalies in the Western US Matches typical El Niño patterns 7 Dec – 20 Dec 2014 Source: Western Regional Climate Center (WRCC), 2014 © 2015 Munich Re 23
Slide 24: 2015 ENSO forecast by climate model simulations
2015 ENSO forecast by climate model simulations Weak El Nino conditions likely to continue The synopsis of available international forecast runs supports the expectatioin of a weak El Niño event to prevail over the first months of 2015 (status: December 2014) © 2015 Munich Re 24
Slide 25: El Niño temperature/precipitation anomalies (Dec-Feb)
El Niño temperature/precipitation anomalies (Dec-Feb) US: Cool and wet in the South and Southeast Typical El Nino consequences, globally (among others): Dry in Indonesia, northeast Australia, northern South America, southern Africa. Wet in southern North America (including California), northeast
Slide 26: Market & Financial Impact of Catastrophe Losses: 2014 Summary
Market & Financial Impact of Catastrophe Losses: 2014 Summary Insurance Information Institute January 7, 2015 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.ii
Slide 27: Winter Storm Losses: Significant Economic Impact
WINTER STORM LOSSES: Significant Economic Impact Losses from Snow, Ice, Freezing and Related Causes Typical Cost Insurers Between $1 Billion and $2 Billion Annually ($2.3B+ in 2014) 27
Slide 28: US Real GDP Growth
US Real GDP Growth* The Q4:2008 decline was Real GDP Growth (%) the steepest since the Q1:1982 drop of 6.8% 5.0% 5.0% 7% 4.6% 4.5% 4.1% 4.1% 3.6% 3.6% 3.5% 3.1% 3.1% 3.0% 3.0% 2.9% 2.9% 2.9% 5% 2.7% 2.7% 2.6% 2.5% 2.5% 2.5% 2.4% 2.3% 2.2% 2.0% 1.8% 1.8% 1.7% 1.4% 1.3% 1.3% 1.3% 1.1% 3% 0.4% 0.5% 0.1
Slide 29: Inflation Adjusted U.S. Catastrophe Losses by Cause of Loss, 1994–2013
Inflation Adjusted U.S. Catastrophe Losses by Cause of Loss, 1994–20131 Wind/Hail/Flood (3), $14.6 Fires (4), $5.5 Other (5), $0.2 Insured cat losses Geological Events, $18.4 1.4% from 1994-2013 Terrorism, $24.8 4.8% 3.8%0.1% totaled $386.7B, an average of $20.6B 6.4% per year or $1.7B Winter Storms
Slide 30: P/C Insurance Industry: Financial Update
P/C Insurance Industry: Financial Update P/C Insurance Industry: Financial Update 2014 Was the 2nd Best Year in the Post-Recession Era (2013 Was First) 30
Slide 31: P/C Industry Net Income After Taxes 1991–2014E
P/C Industry Net Income After Taxes 1991–2014E 2005 ROE*= 9.6% $ Millions Net income rose 2006 ROE = 12.7% strongly (+81.9%) 2007 ROE = 10.9% $65,777 $80,000 in 2013 vs. 2012 $63,784 $62,496 2008 ROE = 0.1% on lower cats, $70,000 2009 ROE = 5.0% capital gains 2010 ROE = 6.6% $50,266 $60,
Slide 32: ROE: Property/Casualty Insurance by Major Event, 1987–2014E
ROE: Property/Casualty Insurance by Major Event, 1987–2014E (Percent) P/C Profitability Is Subject to 20% Cyclicality and Ordinary Katrina, Volatility, Typically Due to CAT Rita, Wilma Activity 15% Low CATs 10% Somewhat higher CAT activity in Sept. 11 2014 had a modest negative 5% Hugo impact on ROE
Slide 33: A Combined Ratio Isn't What It Once Was: Investment Impact on ROEs
A 100 Combined Ratio Isn’t What It Once Was: Investment Impact on ROEs Combined Ratio / ROE 18% A combined ratio of 110 15.9% 14.3% 106.5 about 100 generates an 15% 105 12.7% ROE of ~7.0% in 102.4 100.6 100.1 100.8 10.9% 101.2 101.0 2012/13, ~7.5% ROE in 99.5 12% 100 97.5 97.8 2009/10, 96.7 95.7 10%
Slide 34: Industry Claims Paying Capital Stands at Record High in 2014
SURPLUS/CAPITAL/CAPACITY Industry Claims Paying Capital Stands at Record High in 2014 (Re)Insurance Industry is Well Positioned to Manage Large Scale Catastrophe Losses 34
Slide 35: Policyholder Surplus, 2006:Q4–2014:Q4E
Policyholder Surplus, 2006:Q4–2014:Q4E ($ Billions) 2007:Q3 Drop due to near-record Pre-Crisis Peak 2011 CAT losses $675.0 $750 Low CAT losses are $653.3 $624.4 a driver of increased $700 $587.1 capital $583.5 $570.7 $567.8 $559.2 $559.1 $650 $566.5 $550.3 $544.8 $540.7 $538.6 $530.5 $521.8 $517.9 $
Slide 36: Investments: The New Reality
Investments: The New Reality Investment Income Offsets Less Loss than in the Past, Including Losses from Catastrophes 36
Slide 37: P/C Insurance Industry Investment Income: 2000–2014E
Property/Casualty Insurance Industry Investment Income: 2000–2014E1 ($ Billions) Investment earnings are still $60 below their 2007 pre-crisis $54.6 peak due to low yields $52.3 $51.2 $49.5 $49.2 $50 $48.0 $47.4 $47.1 $47.6 $45.7 $38.9 $39.6 $40 $38.7 $37.1 $36.7 $30 00 01 02 03 04 05 06 07 08 09 10
Slide 38: Book Yield on P/C Insurance Invested Assets, 2007–2014E
Book Yield on Property/Casualty Insurance Invested Assets, 2007–2014E (Percent) 4.6 4.42 4.4 Book yield in 2014 is 4.19 down 114 BP from 4.2 3.95 pre-crisis levels 4.0 3.8 3.71 3.74 3.6 3.52 3.38 3.4 3.28 3.2 3.0 07 08 09 10 11 12 13 14E The yield on invested assets continues to decline as returns o
Slide 39: Underwriting Results in 2014 Helped by Modest Catastrophe Losses
UNDERWRITING Underwriting Results in 2014 (and 2013) Were Helped by Generally Modest Catastrophe Losses Welcome Respites from 2011/2012 39
Slide 40: P/C Insurance Industry Combined Ratio, 2001–2014E
P/C Insurance Industry Combined Ratio, 2001–2014E As Recently as 2001, Insurers Relatively Relatively Higher Paid Out Nearly Low CAT Low CAT CAT $1.16 for Every $1 Losses, Losses, Losses, in Earned Reserve Reserve Shrinking Premiums Releases Releases Reserve Releases, Heavy Use of Toll of Soft Reins
Slide 41: Underwriting Gain (Loss) All Lines Combined, 1975–2014
Underwriting Gain (Loss) All Lines Combined, 1975–2014* ($ Billions) 2013 $30 underwriting profit totaled $20 $15.5B $10 $0 Underwriting profit in 2014 -$10 estimated at $5.7B -$20 -$30 -$40 -$50 -$60 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
Slide 42: Severe Weather Reports: Jan. 1 – Dec. 31, 2014
Severe Weather Reports: Jan. 1 – Dec. 31, 2014 Severe weather reports are concentrated east of the Rockies There were 18,581 severe weather reports in 2014; including 1,057 tornadoes; 5,536 “Large Hail” reports and 11,985 high wind events Source: NOAA Storm Prediction Center; http://www.spc.noaa.gov
Slide 43: Number of Federal Major Disaster Declarations, 1953–2014
Number of Federal Major Disaster Declarations, 1953 - December 31, 2014* 120 There have been 2,187 The number of federal disaster federal disaster declarations since declarations set 99 100 1953. The average number of declarations a new record in per year is 35 from 2011, with 99, 81 1953-2013, thou
Slide 44: Combined Ratio Points Associated with Catastrophe Losses
Combined Ratio Points Associated with Catastrophe Losses: 1960 – 2014E* Combined Ratio Avg. CAT Loss Points Component of the Combined Ratio Catastrophe losses as a 10 9.1 share of all losses reached 8.8 by Decade 9 a record high in 2011 8.1 7.5 8 1960s: 1.04 7 1970s: 0.85 5.9 1980s: 1.31 5.4 6 5.0 1
Slide 45: Premium Growth: Catastrophe Losses Impact Trajectory
Premium Growth Premium Growth Catastrophe Losses Impact Trajectory of Premium Growth 45
Slide 46: Net Premium Growth: Annual Change, 1971–2014E
Net Premium Growth: Annual Change, 1971—2014E (Percent) 1975-78 1984-87 2000-03 25% Net Written Premiums Fell 0.7% in 2007 (First Decline Since 1943) by 2.0% in 2008, 20% and 4.2% in 2009, the First 3- Year Decline Since 1930-33. 15% 2014E: 4.0% 10% 2013: 4.6% 2012: +4.3% 5% 0% -5% 71 72 73 74 75 76
Slide 47: Insurance Information Institute Online: www.iii.org
Insurance Information Institute Online: www.iii.org Thank you for your time and your attention! Twitter: twitter.com/bob_hartwig 47
Slide 48: NatCatSERVICE Downloadcenter
NatCatSERVICE Downloadcenter for statistics and analyses on natural disasters The downloadcenter provides free access: Annual statistics Long-term statistics Information on significant natural disasters Focus analyses NatCatSERVICE methodology, info brochure Publication Topics Geo 500% O
Slide 49: Weather Resilience and Protection (WRAP)
Weather Resilience and Protection (WRAP) Website Describe the impact of severe weather and how individuals, businesses, government, and insurers can work together to prepare for and mitigate weather risks. Includes data, publications, preparation tips and other useful information for the press. www.
Slide 50: More Information
More Information Connect with Munich Re Connect with I.I.I. Twitter @Munichre_US @iiiorg @Munichre LinkedIn munich-reinsurance-america-inc. Insurance Information Institute Google+ Munich Re (US) Insurance Information Institute Munich Re YouTube MunichReUs iiivideo MunichReVideo Facebook Munichreus1
Slide 51: Press Inquiries
Press Inquiries Sharon Cooper Phone: +1 (609) 243-8821 [email protected] © 2015 Munich Re 51
Slide 52: Thank you
Thank you Munich RE January 7, 2015
Slide 53: Copyright notice
© Copyright 2015 Munich Reinsurance America, Inc. All rights reserved. "Munich RE" and the Munich Re logo are internationally protected registered trademarks. The material in this presentation is provided for your information only, and is not permitted to be further distributed without the express w
Slide 54: Appendix - 2014 Year End Natural Catastrophe Review
Appendix - 2014 Year End Natural Catastrophe Review
Slide 55: Thunderstorms
US Natural Catastrophe Update Thunderstorms Tornado Count for 2014 The preliminary tornado counts for 2014 are about 400 below the 2005-2013 average. Despite fewer tornadoes, insured convective storm losses were still the second highest on record, including 4 outbreaks that incurred at least $1 bill
Slide 56: Convective loss events in the US
US Natural Catastrophe Update Convective loss events in the US Overall and insured losses 1980 – 2014 bn US$ 50 Overall losses (in 2014 values)* Insured losses 40 (in 2014 values)* Analysis contains: 30 severe storm, tornado, hail, flash flood and lightning 20 10 *Losses adjusted 1980 1982 1984 1986
Slide 57: Loss events in the US 1980–2014
US Natural Catastrophe Update Loss events in the US 1980 – 2014 Number of events Number Geophysical events 250 (Earthquake, tsunami, volcanic activity) Meteorological events 200 2014 Total: (Tropical storm, 119 Events extratropical storm, convective storm, local storm) 150 Hydrological events (Flood
Slide 58: Loss events in the US 1980–2014
US Natural Catastrophe Update Loss events in the US 1980 – 2014 Overall and insured losses Overall losses totaled US$ 25bn; Insured losses totaled US$ 15.3bn Overall losses bn US$ 200 (in 2013 values)* Insured losses (in 2013 values)* 150 100 50 *Losses adjusted to inflation based 1980 1982 1984 198
Slide 59: Notable thunderstorm events
US Natural Catastrophe Update Notable thunderstorm events April 27 – May 1: Large severe cyclonic storm (SCS) outbreak over the Central Plains and Deep South. A total of 80 tornadoes have been confirmed, causing 35 fatalities. Worst hit were Mayflower, Arkansas, and Louisville, Mississippi, both hit
Slide 60: Notable thunderstorm events
US Natural Catastrophe Update Notable thunderstorm events May 18 – May 23: Large hail and non-tornadic wind event stretching from Montana to New York. Hail the size of golf balls impacted sections of Chicago and Denver, and baseball-sized hail impacted parts of Indiana and Ohio. Further east, wind g
Slide 61: Insured losses due to winter storms
US Natural Catastrophe Update Loss events in the US 1980 – 2014 Insured losses due to winter storms* Overall losses totaled US$ 3.7bn; Insured losses totaled US$ 2.4bn Insured losses 4 000 (in 2014 values)** 5 year Mean 3 000 US$m 2 000 *Winter storms include winter damage, blizzard, snow storm and
Slide 62: Winter storms
US Natural Catastrophe Update Winter storms Throughout the winter months, a persistent “Omega Block” pattern, combined with a weakened Polar Vortex, allowed frigid air to stream southward into eastern United States & Canada. Minimum temperatures in some locations were the lowest in 20 years. Due to
Slide 63: Notable wildfires
US Natural Catastrophe Update Notable wildfires A heat wave and strong Santa Ana winds triggered eight wildfires in San Diego County in May. Over 29,000 acres were burned, with about 60 properties destroyed. Luckily, the continued dry conditions did not lead to a severe autumn fire season as some ex
Slide 64: Loss events worldwide 2014: Geographical overview
NatCatSERVICE Loss events worldwide 2014 Geographical overview Flash floods Floods Floods Winter damage Geophysical events USA,11–13 Aug United Kingdom, Bosnia and Herzegovina, USA, Canada, 5–8 Jan Typhoon Rammasun Dec 2013–Feb 2014 Serbia, Croatia, Romania, (Earthquake, tsunami, China, Philippines,
Slide 65: Loss events worldwide 1980–2014
NatCatSERVICE Loss events worldwide 1980 – 2014 Number of events Number Geophysical events (Earthquake, tsunami, 1 000 volcanic activity) Meteorological events (Tropical storm, 800 extratropical storm, convective storm, local storm) 600 Hydrological events (Flood, mass movement) 400 Climatological e
Slide 66: Loss events worldwide 1980–2014: Overall and insured losses
NatCatSERVICE Loss events worldwide 1980 – 2014 Overall and insured losses US$ bn Overall losses 400 (in 2014 values)* Insured losses (in 2014 values)* 300 200 100 *Losses adjusted 1980 1982 1984 1986 1988 1990 1992 1994 1996 1998 2000 2002 2004 2006 2008 2010 2012 2014 to inflation based on country
Slide 67: The five costliest natural catastrophes for the insurance industry
NatCatSERVICE Loss events worldwide 2014 The five costliest natural catastrophes for the insurance industry Date Region Event Fatalities Overall Insured losses losses US$ m US$ m 7-16.2.2014 Japan Winter damage 37 5,900 3,100 18-23.5.2014 United States Severe storms - 3,900 2,900* France, Belgium, 7
Slide 68: Notable global events: Japan
Global Natural Catastrophe Update Notable global events Japan: A pair of heavy snowfall events caused significant infrastructure disruptions and damage across the country in mid-February. Four auto manufacturing plants had to suspend operations due to the conditions. Hundreds of residential and comm
Slide 69: Notable global events: France, Germany, Belgium
Global Natural Catastrophe Update Notable global events France, Germany, Belgium: Several severe thunderstorms developed between June 7-10 that produced several swaths of large hail. Tile roofs, windows, and skylights were shattered by the tennis-ball sized hail, and heavy rains flooding thousands o
Slide 70: Notable global events: United Kingdom
Global Natural Catastrophe Update Notable global events United Kingdom: A series of intense extratropical storms brought several bouts of heavy rains during the winter of 2014, causing widespread flooding around the country. Access to some villages was cut off for a month, and over 6,500 properties
Slide 71: Costliest natural catastrophes since 1950
Global Natural Catastrophe Update Costliest natural catastrophes since 1950 Ranked by insured losses Year Event Region Insured losses US$ m (in original values) 2005 Hurricane Katrina USA 62,200 2011 EQ, tsunami Japan 40,000 2012 Hurricane Sandy USA, Caribbean 29,500 2008 Hurricane Ike USA, Caribbea
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