How Much Are Insurers Paying for Natural Disasters?

It seems that there has been an unusual number of natural disasters in the last two years or so. Hurricane Maria hit the Caribbean in September, while an earthquake in Mexico killed more than 200 people. Hurricane Irma and Hurricane Harvey were also massively destructive in different areas of the US. In other parts of the world, floods and landslides in Sierra Leone and monsoon flooding in Bangladesh were particularly dangerous. Most recently, deadly wildfires have destroyed areas outside of Athens.

So what effect have these catastrophic events had on the insurance industry? It’s estimated that the Lloyd’s market has so far paid claims totaling $1.7bn in response to some of last year’s hurricanes in the US. The total cost of claims in the wake of these three disasters could end up topping $5bn in total. The German insurers Munich Re have predicted that losses from these weather events may even reach as much as $3.2bn.

The earthquake in Mexico meant more enormous payouts for insurers. Losses of $6bn would not be unexpected, and the total insurance bill for last year’s natural disasters came to a staggering $135bn worldwide.

Closer to home

Closer To Home

The UK is lucky not to be immediately at risk from enormous natural disasters like earthquakes and hurricanes – but we do still experience extreme weather from time to time. Think back to the end of 2015, when Storms Desmond, Eva and Frank hit the UK over the Christmas period. Three people were killed when Storm Desmond struck, though there were no fatalities caused by Eva or Frank. Instead, the storms caused enormous damage to homes and businesses, flooding them to the point where they could not be saved. This led to more than 15,000 claims during that time, with the total insurance payout expected to hit £1.3bn. It was also said that the damage caused by the storms and the flooding knocked 0.2% off the country’s economic output for 2015.

Indeed, it seems that flooding is the biggest risk that homeowners and businesses face in the UK, in terms of natural disasters. From the Cumbrian floods of 2005 to the flash floods that overwhelmed different parts of the country in 2012, insurers have paid out billions, with the average payout for a single home between £20,000 and £40,000.

In vast contrast to this, the scorching weather of this Summer has caused a spate of wildfires in the North of England. The true cost of these blazes is yet to be discovered.

The insurance protection gap

One thing that has become apparent in the wake of all these natural disasters is that there’s a real insurance protection gap. This was evident in the US after Hurricane Harvey. Despite the US being one of the most insured countries in the world, a report released shortly after the disaster claimed that a ‘significant proportion of the unprecedented flood losses generated by Hurricane Harvey in Texas and Louisiana’ were uninsured.

It’s a similar story in the UK. After the 2015 storms, KPMG revealed that homeowners and businesses could be picking up a tab of as much as £1bn, because many of them were underinsured.

For more details about home insurance that covers natural disasters, contact the team at Morpheus Insurance today.