The Heat Is Online

2003 Insurance Losses Up from Extreme Events

Natural disaster deaths rise sevenfold

Reuters News Service, Feb. 27, 2004

FRANKFURT - Natural disasters caused by extreme weather claimed seven times as many victims in 2003 as in the previous year and the trend is set to continue, says the world's biggest reinsurance company.

Munich Re said in its annual review of natural catastrophes that earthquakes, heat waves and tornadoes had killed 75,000 people during the year, including 40,000 who died in December's severe earthquake in Iran.

The figure was higher than the 50,000 estimate the company gave in a preliminary report in December, largely because the full effects of the Iranian earthquake were not yet known then, a Munich Re spokesman said.

"After three years of relative calm, no fewer than five great natural catastrophes occurred in 2003," the report said, saying the five events alone had accounted for about a third of all economic and insured losses.

Apart from the Iranian earthquake, a heat wave that hit central and southern Europe in the summer claimed 20,000 lives, and an earthquake measuring 6.8 on the Richter scale killed 2,200 in Algeria in May, the report said.

The most expensive disasters for insurers, however, were in the United States, where tornadoes battered the Midwest in May and a heat wave caused drought and forest fires in California in October and November, destroying thousands of homes.

The Californian fires cost the insurance industry some $2 billion (1.06 billion pounds) , Munich Re said, while a massive hailstorm in Texas during the tornadoes "will go down in U.S. insurance history" after generating insured losses of more than $1 billion.

In total, insured losses were 40 percent higher than in 2002 at $16 billion, said Munich Re, which insures insurance companies for the risks from their policies. Total economic losses rose 18 percent to $65 billion.

DRAMATIC CHANGES

Munich Re said global warming would cause increasing economic damage in the future. In central Europe alone, an expected two-degree Celsius increase in temperatures by the middle of the century would cause more heat waves and floods.

"It is to be feared that extreme events which can be traced to climate change will have increasingly grave consequences in the future," the report said, adding that insurance premiums would rise and that clear-cut indemnity limits would be needed.

"Neither human beings, buildings and infrastructure nor the agricultural and livestock sectors are prepared for such extremes," it said. "We would be well advised to prepare ourselves for dramatic changes."

However, Munich Re said it believed climate protection was about to enter "a new dimension" and welcomed the impending start of emissions trading in the European Union in 2005, which will offer a financial incentive to reduce pollution.

The system will allow companies that exceed their emission limits for carbon dioxide (CO2), blamed by many scientists for global warming, to buy and trade emissions permits.

But the EU may review its strategy of backing the Kyoto Protocol, which is designed to limit CO2 emissions, as Russian hesitations over the accord threaten to stop it coming into force.

The United States, the world's top polluter, has already refused to back Kyoto, saying it is a regulatory straitjacket that will harm industry and economic growth.