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Wednesday, March 27, 2013

2012 third most expensive year for insurers

Mumbai: The year 2012 was the third most expensive for insurers in terms of disaster claims. Large-scale weather events in the US pushed the total insured claims for the year to $77 billion. For insurers, this is a big setback considering that it comes on the back of $126 billion of record catastrophic claims in 2011 following the Japan earthquake and floods in Taiwan. 

    Unlike 2011, when GIC booked record losses of Rs 2,490 crore due to reinsurance cover it had provided to companies with exposure to Thailand, this year's disaster claims won't have a direct bearing on India. However, they will have an indirect bearing on the insurance business worldwide. High claims are a factor in hardening of reinsurance rates. Sinceinsurance companies in India buy backstop protection from international reinsurers they are affected as well. 
    According to Swiss Re's annual disaster report, natural catastrophes and manmade disasters in 2012 caused economic losses of $186 billion, with approximately 14,000 lives lost. Nine of the 10 most expensive insured loss events happened in the US in 2012 with Hurricane Sandy topping the list followed by drought losses. High insurance penetration in North America meant that $65 billion, over half of the $119 billion in economic loss
es in the region, were covered by insurance. The drought in US resulted in agricultural losses of $11 billion, the highest ever recorded loss in farm insurance
    In India, Swiss Re has classified the collapse of the northern grid in 2012 as a weather-related disaster. "Weak monsoon rains forced farmers to pump water to 
their fields causing three of India's interconnected power grids to collapse for several hours one day in summer. As a result, northern India suffered the largest electrical blackout in history, affecting an area encompassing 670 million people," the report said. 
    "The severe weather-related events in the US provided a reminder of the value of insurance and the vital role it plays in helping individuals, communities and businesses to recover from the devastating effects of catastrophes. However, large parts of the globe that are prone to weather extremes were not able to rely on financial relief due to lowinsurance penetration," said Kurt Karl, Swiss Re's chief economist.



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