Econintersect: The headline singles out Australia, but the cost of weather related damage is increasing globally. More about Australia later (info graphic). This increase in losses has caused insurance companies to start looking at ways accomodate their increased risks. Reuters recently reported that one of the world’s largest reinsurers, Munich Re, has indicated that catastrophe bonds may be added to the insurance industry arsenal.
Here are two excerpts from the Reuters article:
Munich Re said that until now socio-economic factors such as population growth in urban areas had accounted for rising insured losses, but their records showed evidence that climate change was leading to an increase in natural catastrophes.
….reinsurers are struggling to raise prices for disaster insurance amid intense competition, and the rise in popularity of catastrophe bonds – seen as an alternative form of cover .
Catastrophe bonds are typically issued by big reinsurers to cover a low-probability, high-loss event. Investors receive a high rate of interest but risk losing part or all of their money in the unlikely event a catastrophe occurs.
Below is the Nathan World Map of Natural hazards (From Munich RE):
Click on map for larger image.
Now for some specific numbers for Australia (as promised):
This infographic was conceived with the help of Budget Direct.
Sources:
- Reinsurers should price in rise in natural disasters -Munich Re (Sarah Mortimer, Reuters, 17 October 2012)
- Nathan World Map of Natural Disasters (Munich RE)
