Survey
* Your assessment is very important for improving the workof artificial intelligence, which forms the content of this project
* Your assessment is very important for improving the workof artificial intelligence, which forms the content of this project
Natural Catastrophe Review Webinar First Half of 2015 July 14, 2015 Agenda Introduction Sharon Cooper Press Spokesperson, Munich Re America US Natural Catastrophe Update Carl Hedde Head of Risk Accumulation, Munich Re America Update on El Niño & Global Natural Catastrophes Dr. Peter Höppe Head of Geo Risks Research, Munich Re Economic Implications of Natural Catastrophe Losses Dr. Robert Hartwig President & Economist, Insurance Information Institute © 2015 Munich Re 2 Webinar Interactivity Questions and Answers You will have an opportunity to ask questions at the conclusion of the presentation. An operator will facilitate your participation. Live Tweeting @Munichre_US @lworters @iii © 2015 Munich Re #NATCAT2015 3 US Natural Catastrophes - First Half of 2015 Carl Hedde, Head of Risk Accumulation Munich Reinsurance America, Inc. © 2015 Munich Re Source: FEMA US Natural Catastrophe Update US Headlines – First Half 2015 Insured losses in US totaled $8.2 billion – far below 2000 - 2014 average loss of $11.2 billion (Jan-June) Drought conditions in California continue to worsen, creating increased risk of wildfires. El Niño conditions may bring much needed rains this winter Record rainfall in Texas and Oklahoma alleviate drought, but cause severe flash flooding in Houston and Texas Hill Country Eastern U.S. experienced second winter of brutal cold/snow; damage estimated to exceed $2.9 billion, a new record (in terms of original loss dollars) Severe thunderstorm events caused estimated $5.1 billion in insured loss, lowest half-year total since 2006 © 2015 Munich Re 5 US Natural Catastrophe Update Natural disaster losses in the U.S. 2015 Based on perils (January – June only) Number of Events Severe Thunderstorm Fatalities Estimated Overall Losses (US $m) Estimated Insured Losses (US $m)* 38 66 7,000 5,100 Winter Storms & Cold Waves 11 80 3,800 2,900 Flood, Flash Flood 10 4 500 150 Earthquake & Geophysical 1 - - - Tropical Cyclone 2 4 100 60 Wildfire, Heat Waves, & Drought 18 - 1,300 Minor market loss Totals 80 154 12,600 8,200 As of July 1, 2015 *Source: Property Claim Services (PCS) as of 7.7.2015 © 2015 Munich Re 6 US Natural Catastrophe Update Loss events in the U.S. 1980 – 2015 Number of events (January – June only) Number Geophysical events (Earthquake, tsunami, volcanic activity) First Six Months in 2015 80 Events Meteorological events (Tropical storm, extratropical storm, convective storm, local storm) 22 10 47 Hydrological events (Flood, mass movement) Climatological events (Extreme temperature, drought, forest fire) 1 Source: Munich Re, NatCatSERVICE © 2015 Munich Re 7 US Natural Catastrophe Update Loss events in the U.S. 1980 – 2015 Overall and insured losses (January – June only) Overall losses totaled US$ 12.6bn; Insured losses totaled US$ 8.2bn Overall losses (in 2015 values)* bn US$ Insured losses (in 2015 values)* *Losses adjusted to inflation based on country CPI Source: Munich Re, NatCatSERVICE © 2015 Munich Re 8 March 2010 March 2015 Notable U.S. Events First Half of 2015 © 2015 Munich Re Photos: NASA US Natural Catastrophe Update Drought Conditions as of 30 June 2015 © 2015 Munich Re 10 US Natural Catastrophe Update Extreme Precipitation in Texas & Oklahoma The United States saw its wettest month of May on record. May 2015 was also the wettest month in the history of Oklahoma and Texas, in terms of statewide average rainfall. OK: 14.18” (Previous 10.75”, October 1941) TX: 7.54” (Previous 6.66”, June 2004) © 2015 Munich Re 11 US Natural Catastrophe Update Winter storms First Half 2015 For second straight year, persistent ridge over western North America caused frigid air to stream southward into eastern US Record snowfalls across New England, caused numerous roof collapses, while frigid temperatures burst pipes Aggregate insured losses estimated at $2.9 billion, largest total in terms of original loss dollars Source: Property Claims Service; MR NatCatSERVICE Source: FEMA © 2015 Munich Re 12 US Natural Catastrophe Update Thunderstorms Tornado Count for First Half 2015 Preliminary tornado counts for first half of 2015 about 200 below the 2005-2014 average. Tornado counts in April (185) and May 2015 (414) were much higher than in 2014. Source: NOAA © 2015 Munich Re 13 US Natural Catastrophe Update Insured Loses Due to Convective Storms* January – June Only, 1980 - 2015 Overall losses totaled US$ 7.0bn; Insured losses totaled US$ 5.1bn US$m Insured losses (in 2014 values)** 5 year Mean *Convective storms include tornadoes, hail, and straight-line winds **Losses adjusted to inflation based on country CPI © 2015 Munich Re 14 Update on El Niño Dr. Peter Höppe, Head of Geo Risks Research Munich Re © 2015 Munich Re Source: NOAA Update on El Niño ENSO (El Niño/Southern Oscillation) Definitions ENSO (El Niño/Southern Oscillation): natural climate oscillation in tropical Pacific Ocean, which affects both ocean and atmosphere. Anomaly of sea surface temperature in so called Niño3.4-Region (= Niño3.4-Index) is used to define ENSO-Phases: El Niño (Niño3.4-Index >0,5) Neutral Phase (Niño3.4-Index <0,5 und >-0,5) La Niña (Niñno3.4-Index <-0,5) Anomalies of sea surface temperatures in Niño3.4-region since 1950 Location of Niño 3.4-region Source: Climate Prediction Center/NOAA © 2015 Munich Re 16 Update on El Niño The 2015-2016 El Niño Moderate El Niño conditions have developed over past 6 months over eastern equatorial Pacific Forecasts indicate this will likely be strongest El Niño event since 1997-1998 If strong El Niño develops, there is high probability for a La Niña next year Current Impacts: - Record amount of Accumulated Cyclone Energy (ACE) released by northern hemisphere tropical cyclones so far this year (166 vs. normal of 54 through 30 June) - Disruption of monsoons in South Asia; has contributed to the record heat wave there. Source: NOAA/CPC © 2015 Munich Re 17 Update on El Niño The 2015-2016 El Niño Expected U.S. Impacts: Cooler and wetter than normal along southern third of nation Drier than normal in Pacific Northwest and Ohio River valley; warmer than normal from Alaska to Northern Plains Reduced tropical cyclone risk in Atlantic; increased risk in Eastern Pacific and Hawaii. Potential for heavy rains, mudslides in California Potential for reduced winter tornado outbreaks over south-central U.S. ; increased risk of winter tornadoes over Florida peninsula © 2015 Munich Re 18 Update on El Niño Global characteristic changes in El Niño phases Lower TS activity in Atlantic ocean; higher in East-Pacific Increased flood risks in South America; Southeast China Increased drought risk in East and North Australia; Southeast and South Asia; Southern Africa; North/Northeast Brazil © 2015 Munich Re 19 Update on El Niño State of Climate (NOAA): 2014 warmest year on record! 2015 starts with new record! 2014 was the warmest year across global land and ocean surfaces since records began in 1880 9 of 10 warmest years in 135-year period of record have occurred in 21st century 1998 currently ranks as fourth warmest year on record. January to May 2015 warmest first five months on record! © 2015 Munich Re 20 Update on El Niño G7 Climate Risk Insurance Initiative G7 decided to support people in developing countries to protect themselves against economic consequences of more intense and frequent extreme weather events Target: extra 400 million people earning less than US$ 2 per day get access to direct (100 m) or indirect (300 m) insurance of losses caused by weather extremes German Government already pledged € 150 million for first two project years with option of more to follow later Munich Re has been involved w/German government in preparation of G7 initiative: directly with in house geo risks research expertise and indirectly by Munich Climate Insurance Initiative (MCII) CRII has high potential to become milestone on climate change adaptation and resilience for poor countries. © 2015 Munich Re 21 Global Natural Catastrophes - First Half of 2015 © 2015 Munich Re Global Natural Catastrophe Update Loss events worldwide Jan – June 2015 Geographical overview Winter Storm Niklas Europe, 30 March–1 April Earthquake Nepal, China, India, Bangladesh 25 April Winter storms Elon and Felix Europe, 8–11 January Winter storm USA, Canada 16–25 February Avalanche, winter damage Afghanistan, February–March Cyclone Marcia Australia, 18–20 February Severe storms USA, 7–10 April Severe storm, tornado China, 1 June Flash floods Chile, 23–26 March (Earthquake, tsunami, volcanic activity) Meteorological events (Tropical storm, extratropical storm, convective storm, local storm) Hydrological events (Flood, mass movement) Climatological events Cyclone Pam Vanuatu, 9–16 March Severe storms USA, 18–21 April 510 Loss events Geophysical events Heatwave India, Pakistan May–June Winter storm Australia, 19–24 April (Extreme temperature, drought, wildfire) Loss events Selection of Catastrophes Source: Munich Re, NatCatSERVICE, 2015 Source: Geo Risks Research, NatCatSERVICE – As at July 2015 © 2015 Munich Re 23 Global Natural Catastrophe Update Loss events worldwide 1980 – 2015 Number of events (January – June only) Number Geophysical events (Earthquake, tsunami, volcanic activity) Meteorological events (Tropical storm, extratropical storm, convective storm, local storm) Hydrological events (Flood, mass movement) Climatological events (Extreme temperature, drought, forest fire) Source: Munich Re, NatCatSERVICE – As at July 2015 © 2015 Munich Re 24 Global Natural Catastrophe Update Loss events worldwide 1980 – 2015 Overall and insured losses (January – June only) US$ bn Overall losses (in 2015 values)* Insured losses (in 2015 values)* *Losses adjusted to inflation based on country CPI Source: Munich Re, NatCatSERVICE – As at July 2015 © 2015 Munich Re 25 Global Natural Catastrophe Update Loss events worldwide 2015 Overview and comparison with previous years Number of events 2015 (Jan – June) 2014 (Jan – June) Average of the last 10 years 2005-2014 (Jan – June) Average of the last 30 years 1985-2014 (Jan – June) Top Year 1985 -2014 (Jan – June) 510 520 440 330 620 (2012) Overall losses in US$ m (original values) 35,000 Insured losses in US$ m (original values) 12,000 Fatalities 16,200 60,000 95,000 64,000 302,000 (2011, EQ Japan) 23,000 27,000 15,000 82,000 (2011, EQ Japan) 2,800 46,000 27,000 230,000 (2010, EQ Haiti) © 2015 Munich Re 26 Global Natural Catastrophe Update Loss events worldwide 2015 The five costliest natural catastrophes for the insurance industry Insured losses US$ m Date Region Event 16-25.2.2015 United States, Canada Winter storm 39 2,400 1,800* 30.3-1.4.2015 Europe Winter Storm Niklas 11 1,400 1,000 7-10.4.2015 United States Severe storms 3 1,400 990* 18-21.4.2015 United States Severe storms - 1,100 780* 23-28.5.2015 United States Severe storms 32 1,300 750* *Date based on information from PCS Fatalities Overall losses US$ m © 2015 Munich Re 27 Global Natural Catastrophe Update Costliest natural catastrophes since 1980 Ranked by insured losses Year Event Region 2005 Hurricane Katrina USA 60,500 2011 EQ, tsunami Japan 40,000 2012 Hurricane Sandy USA, Caribbean 29,500 2008 Hurricane Ike USA, Caribbean 18,500 1992 Hurricane Andrew USA 17,000 2011 EQ Christchurch New Zealand 16,500 2011 Floods Thailand 16,000 1994 EQ Northridge USA 15,300 2005 Hurricane Wilma USA, Caribbean 12,500 2012 Drought USA 12,000 © 2015 Munich Re Insured loss US$m (in original values) 28 Market & Financial Impact of Catastrophe Losses: First Half 2015 Summary Insurance Information Institute July 14, 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.iii.org 29 WINTER STORM LOSSES: Significant Economic Impact—Again! Losses from Snow, Ice, Freezing and Related Causes Typical Cost Insurers Between $1 Billion and $2 Billion Annually ($2.3B+ in 2014/15) 30 US Real GDP Growth* -7% -0.3% Q1 2014 GDP data were hit hard by that year’s “Polar Vortex” and harsh winter 2.2% 2.9% 3.2% 3.0% 2.7% 2.8% 2.7% 2.6% Q1 2015 GDP data were again hit hard by harsh winter weather -8.9% 2000 2001 2002 2003 2004 2005 2006 2007 08:1Q 08:2Q 08:3Q 08:4Q 09:1Q 09:2Q 09:3Q 09:4Q 10:1Q 10:2Q 10:3Q 10:4Q 11:1Q 11:2Q 11:3Q 11:4Q 12:1Q 12:2Q 12:3Q 12:4Q 13:1Q 13:2Q 13:3Q 13:4Q 14:1Q 14:2Q 14:3Q 14:4Q 15:1Q 15:2Q 15:3Q 15:4Q 16:1Q 16:2Q 16:3Q 16:4Q -9% Great Recession Dec. 2007June 2009 -5.3% -5% -3.7% -1.8% -1% -0.2% 1% -3% 4.6% 5.0% 1.4% -2.1% 3% 1.3% 5% 4.1% 1.1% 1.8% 2.5% 3.6% 3.1% 2.7% 1.8% 7% 5.0% 2.3% 2.2% 2.6% 2.4% 0.1% 2.5% 1.3% 4.1% 2.0% 1.3% 3.1% 0.4% 2.7% 1.8% 4.5% 3.5% The Q4:2008 decline was the steepest since the Q1:1982 drop of 6.8% Real GDP Growth (%) Demand for Insurance Should Increase in 2015 as GDP Growth Accelerates Modestly and Gradually Benefits the Economy Broadly * Estimates/Forecasts from Blue Chip Economic Indicators. Source: US Department of Commerce, Blue Economic Indicators 7/15; Insurance Information Institute. 31 Inflation Adjusted U.S. Catastrophe Losses by Cause of Loss, 1995–20141 Wind/Hail/Flood (3), $21.4 Fires (4), $6.0 Winter storm Other (5), $0.2 losses were 1.5% Geological Events, $0.5 much above 5.4% average in Terrorism, 0.1% 0.1% 2014/15 are $24.5 6.2% will push this share up 6.8% Winter Storms, $26.9 40.7% Tornado share of CAT losses is rising Events Involving Tornadoes (2), $154.9 Insured cat losses from 1995-2014 totaled $395.6B, an average of $19.8B per year or $1.65B per month Hurricanes & Tropical Storms, $161.2 39.2% Wind losses are by far cause the most catastrophe losses, even if hurricanes/TS are excluded. 1. Catastrophes are defined as events causing direct insured losses to property of $25 million or more in 2014 dollars. 2. Excludes snow. 3. Does not include NFIP flood losses 4. Includes wildland fires 5. Includes civil disorders, water damage, utility disruptions and non-property losses such as those covered by workers compensation. Source: ISO’s Property Claim Services Unit. 32 Top 16 Most Costly Disasters in U.S. History—Katrina Still Ranks #1 (Insured Losses, 2014 Dollars, $ Billions) Storm Sandy in 2012 was the last mega-CAT to hit the US $60 $50.2 $50 $40 $30 Includes Tuscaloosa, AL, tornado Includes Joplin, MO, tornado $24.6 $25.3 $26.4 $19.3 $20 $10 $0 12 of the 16 Most Expensive Events in US History Have Occurred Since 2004 $11.4 $8.1 $9.0 $9.4 $7.7 $7.3 $6.9 $4.6 $5.7 $5.8 Irene (2011) Jeanne (2004) Frances (2004) Rita Tornadoes/Tornadoes/ Hugo (2005) T-Storms T-Storms (1989) (2011) (2011) Ivan (2004) Charley (2004) Wilma (2005) $13.8 Ike (2008) Sources: PCS; Insurance Information Institute inflation adjustments to 2014 dollars using the CPI. Sandy* Northridge9/11 Attack Andrew (2012) (1994) (2001) (1992) Katrina (2005) 33 I.I.I. Poll: 10 Years After Katrina, Most Understand Flood Is Not Covered Under Standard HO Policies Q. Does your homeowners policy cover damage from flooding during a hurricane?1 Don’t know 24% 19% Yes 56% No More Than Half of Homeowners Know Their HO Insurance Does Not Cover Flood From a Hurricane, But A Significant Proportion Either Think It Does Or Do Not Know. 1Asked of those who have home insurance. Source: Insurance Information Institute Annual Pulse Survey. 34 I.I.I. Poll: Flooding from Hurricanes Q. Does your homeowners policy cover damage from flooding during a hurricane?1 Respondents answering “yes”. 40% 34% 30% 30% 24% 20% 14% 14% Midwest West 10% 0% South Northeast Total U.S. Homeowners in the South and Northeast Were Most Likely to Think Home Insurance Pays for Flood Damage. 1Asked of those who have home insurance. Source: Insurance Information Institute Annual Pulse Survey. 35 P/C Insurance Industry: Financial Update 2015 Is Likely to Be One of the Strongest Years in the Post-Recession Era (2013 Was Best) 36 $55,501 $63,784 $18,100 $33,522 $19,456 $28,672 $35,204 $62,496 $44,155 $38,501 $30,029 $20,559 $30,773 $36,819 Net income fell modestly (-12.5%) in 2014 vs. 2013 Net income was up sharply in Q1, lower cats were one factor $3,043 $10,000 $3,046 $20,000 $21,865 $30,000 $24,404 $40,000 $20,598 $50,000 $10,870 $60,000 $19,316 $70,000 2005 ROE*= 9.6% 2006 ROE = 12.7% 2007 ROE = 10.9% 2008 ROE = 0.1% 2009 ROE = 5.0% 2010 ROE = 6.6% 2011 ROAS1 = 3.5% 2012 ROAS1 = 5.9% 2013 ROAS1 = 10.2% 2014 ROAS1 = 8.4% 2015:Q1E ROAS = 10.5% $5,840 $80,000 $14,178 $ Millions $65,777 P/C Industry Net Income After Taxes 1991–2015:Q1 $0 14 13 12 15:Q1 •ROE figures are GAAP; 1Return on avg. surplus. Excluding Mortgage & Financial Guaranty insurers yields a 8.2% ROAS in 2014, 9.8% ROAS in 2013, 6.2% ROAS in 2012, 4.7% ROAS for 2011, 7.6% for 2010 and 7.4% for 2009. Sources: A.M. Best, ISO; Insurance Information Institute 11 10 09 08 07 06 05 04 03 02 01 99 98 97 96 95 94 93 92 91 00 -$6,970 -$10,000 37 ROE: Property/Casualty Insurance by Major Event, 1987–2015:Q1 (Percent) 20% P/C Profitability Is Subject to Cyclicality and Ordinary Volatility, Typically Due to CAT Activity Katrina, Rita, Wilma 15% Low CATs 2015 similar to 2013-14 10% Sept. 11 5% 0% Hugo Lowest CAT Losses in 15 Years Andrew Northridge 4 Hurricanes Financial Crisis* Sandy Somewhat higher CAT activity in 2014 had a modest negative impact on ROE Record Tornado Losses -5% 87 88 89 90 91 92 93 94 95 96 97 98 99 00 01 02 03 04 05 06 07 08 09 10 11 12 13 14* 15** * Excludes Mortgage & Financial Guarantee in 2008 – 2014. Sources: ISO; Insurance Information Institute. 38 A 100 Combined Ratio Isn’t What It Once Was: Investment Impact on ROEs Lower CATs (relative to 2011/12) helped ROEs in 2013/14/15 Combined Ratio / ROE 15.9% 110 106.5 14.3% 12.7% 105 100.6 100.1 100.8 100 10.9% 101.2 97.5 95.7 95 8.8% 9.6% 92.7 90 99.5 15% 102.4 101.0 10.5% 12% 96.7 97.2 96.0 9% 7.4% 7.9% 6.2% 9.8% 8.2% 4.7% 6% 4.3% 85 18% A combined ratio of about 100 generates an ROE of ~7.0% in 2012/13, ~7.5% ROE in 2009/10, 10% in 2005 and 16% in 1979 3% 80 0% 1978 1979 2003 2005 2006 2007 2008 Combined Ratio 2009 2010 2011 2012 2013 2014 2015:Q1 ROE* Combined Ratios Must Be Lower in Today’s Depressed Investment Environment to Generate Risk Appropriate ROEs * 2008 -2014 figures are return on average surplus and exclude mortgage and financial guaranty insurers. 2014: combined ratio including M&FG insurers is 97.0; 2013 = 96.1; 2012 =103.2, 2011 = 108.1, ROAS = 3.5%. Source: Insurance Information Institute from A.M. Best and ISO Verisk Analytics data. 39 SURPLUS/CAPITAL/CAPACITY Industry Claims Paying Capital Stands at Near Record High as of mid-2015 (Re)Insurance Industry is Well Positioned to Manage Large Scale Catastrophe Losses 40 $624.4 $614.0 $607.7 $583.5 $567.8 $570.7 $550.3 $538.6 $559.1 $544.8 $530.5 $540.7 $511.5 $671.0 $674.7 $671.6 $673.9 The P/C insurance industry entered 2015 (and the 2015 hurricane season on June 1) in very strong financial condition. 15:Q1E 14:Q4 14:Q3 14:Q2 14:Q1 13:Q4 13:Q3 13:Q2 13:Q1 12:Q4 12:Q3 12:Q2 12:Q1 11:Q4 11:Q3 11:Q2 11:Q1 10:Q4 10:Q3 10:Q2 10:Q1 Surplus as of 3/31/15 stood at a near-record high of $671B 09:Q4 $463.0 $490.8 09:Q3 09:Q2 $437.1 $455.6 08:Q4 08:Q3 08:Q2 08:Q1 07:Q4 07:Q3 07:Q2 07:Q1 $400 06:Q4 $450 09:Q1 $505.0 $478.5 $517.9 $515.6 $521.8 $496.6 $500 $487.1 $550 $512.8 $600 $559.2 $566.5 2007:Q3 Pre-Crisis Peak $650 $586.9 Drop due to near-record 2011 CAT losses $700 $662.0 ($ Billions) $653.4 Policyholder Surplus, 2006:Q4–2015:Q1E The industry now has $1 of surplus for every $0.73 of NPW, close to the strongest claims-paying status in its history. 2010:Q1 data includes $22.5B of paid-in capital from a holding company parent for one insurer’s investment in a non-insurance business. Sources: ISO, A.M .Best; I.I.I. estimate for Q1:2015 41 Investments: The New Reality Investment Income Offsets Less Loss than in the Past, Including Losses from Catastrophes 42 Property/Casualty Insurance Industry Investment Income: 2000–2015E1 ($ Billions) Investment earnings are still below their 2007 pre-crisis peak $60 $54.6 $52.3 $50 $40 $51.2 $49.5 $49.2 $47.1 $47.6 $38.9 $38.7 $48.0 $47.3 $46.2 $46.7 $39.6 $37.1 $36.7 $30 00 01 02 03 04 05 06 07 08 09 10 11 12 13 14 15E Due to persistently low interest rates, investment income fell in 2012, 2013 and 2014. A small increase in 2015 is possible as interest rates slowly increase. 1 Investment gains consist primarily of interest and stock dividends. Sources: ISO; Insurance Information Institute. *2015 figure is estimated based on annualized data through Q1. 43 Book Yield on Property/Casualty Insurance Invested Assets, 2007–2015* (Percent) 4.6 4.4 4.38 Book yield in 2015 is down 74 BP from precrisis levels 4.17 4.2 4.02 4.0 3.87 3.74 3.8 3.82 3.6 3.63 3.64 14 15* 3.44 3.4 3.2 3.0 07 08 09 10 11 12 13 The yield on invested assets remains low relative to pre-crisis yields. The Fed’s plan to raise interest rates in late 2015 has already pushed up some yields, albeit quite modestly. *2015 figure is the average of the four quarters ending in 2015:Q1. Sources: SNL Financial; Insurance Information Institute 44 UNDERWRITING Underwriting Results in 2015 (and 2013-14) Were Helped by Generally Modest Catastrophe Losses Welcome Respites from 2011/2012 45 P/C Insurance Industry Combined Ratio, 2001–2015:H1* Heavy Use of Reinsurance Lowered Net Losses As Recently as 2001, Insurers Paid Out Nearly $1.16 for Every $1 in Earned Premiums Relatively Low CAT Losses, Reserve Releases 120 115.8 110 Best Combined Ratio Since 1949 (87.6) 107.5 Cyclical Deterioration 99.3 98.4 Higher CAT Losses, Shrinking Reserve Releases, Toll of Soft Market Avg. CAT Losses, More Reserve Releases 101.0 100.8 100.1 100 Relatively Low CAT Losses, Reserve Releases Sandy Impacts Lower CAT Losses 106.3 102.4 100.8 Modest CATs 96.7 97.2 97.0 95.7 Somewhat higher CAT Losses 92.6 90 01 02 03 04 05 06 07 08 09 10 11 12 13 * Excludes Mortgage & Financial Guaranty insurers 2008--2014. Including M&FG, 2008=105.1, 2009=100.7, 2010=102.4, 2011=108.1; 2012:=103.2; 2013: = 96.1; 2014: = 97.0. Sources: A.M. Best, ISO; I.I.I. estimate for H1:2015. 14 15:H1 46 Underwriting Gain (Loss) All Lines Combined, 1975–2015* ($ Billions) $30 $20 2014 underwriting profit totaled $12.3B $10 Underwriting profit in 2014 estimated at $14B $0 -$10 -$20 -$30 -$40 -$50 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 08 09 10 11 12 13 14 15E -$60 High CAT losses in 2011 led to the highest underwriting loss since 2001. Lower CAT losses in 2013, 2014 and modest losses so far in 2015. First underwriting profits since 2007. Note: Includes mortgage and financial guaranty insurers in all years. Sources: A.M. Best, ISO, Insurance Information Institute. 47 Severe Weather Reports: Jan. 1 – July 13, 2015 Severe weather reports are concentrated east of the Rockies There were 12,360 severe weather reports through July 13, 2015; including 874 tornadoes; 3,921 “Large Hail” reports and 7,564 high wind events Source: NOAA Storm Prediction Center; http://www.spc.noaa.gov/climo/online/monthly/2015_annual_summary.html 48 Number of Federal Major Disaster Declarations, 1953-2015* 0 81 75 55 54 47 59 63 48 52 56 50 45 45 49 44 23 32 36 32 38 43 45 31 27 28 23 11 15 24 21 34 42 23 29 17 17 19 11 11 22 20 25 25 12 12 23 federal disasters have declared so far in 2015* 53 54 55 56 57 58 59 60 61 62 63 64 65 66 67 68 69 70 71 72 73 74 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 08 09 10 11 12 13 14 15* 7 7 13 17 18 16 16 40 30 22 25 38 48 46 46 60 20 69 65 80 75 100 The number of federal disaster declarations set a new record in 2011, with 99, shattering 2010’s record 81 declarations. 99 There have been 2,228 federal disaster declarations since 1953. The average number of declarations per year is 35 from 1953-2014, though there few haven’t been recorded since 1995. 120 The Number of Federal Disaster Declarations Is Rising and Set New Records in 2010 and 2011 Before Dropping in 2012-2014 *Through July 12, 2015. Source: Federal Emergency Management Administration; http://www.fema.gov/disasters; Insurance Information Institute. 49 Combined Ratio Points Associated with Catastrophe Losses: 1960 – 2015E* 9.1 Catastrophe losses as a share of all losses reached a record high in 2011 3.2 3.6 3.7 4.5 5.0 Catastrophe losses as a share of all losses have been down substantially since 2013 2014 2012 2010 2008 1.6 2.6 2.7 2006 1.6 2002 2004 1.6 2000 3.3 3.3 3.6 2.9 1.0 1998 1992 7.5 8.1 5.4 5.9 2.3 2.1 1.2 1990 1988 1986 1984 1982 1980 1978 1976 1974 1972 1970 1968 1.2 0.4 0.8 1.3 0.3 0.4 0.7 1.5 1.0 0.4 0.4 0.7 1.8 1.1 0.6 1.4 2.0 1.3 2.0 0.5 0.5 0.7 3.0 3.6 0.4 1966 1964 1962 0.8 1.1 1.1 0.1 0.9 1 0 1960 5 4 3 2 1960s: 1.04 1970s: 0.85 1980s: 1.31 1990s: 3.39 2000s: 3.52 2010s: 5.6E* 1996 8 7 6 3.3 2.8 10 9 8.8 Avg. CAT Loss Component of the Combined Ratio by Decade 1994 Combined Ratio Points The Catastrophe Loss Component of Private Insurer Losses Has Increased Sharply in Recent Decades *2010s represent 2010-2015E. Notes: Private carrier losses only. Excludes loss adjustment expenses and reinsurance reinstatement premiums. Figures are adjusted for losses ultimately paid by foreign insurers and reinsurers. Source: ISO (1960-2011); A.M. Best (2012-2014); Insurance Information Institute. 50 Premium Growth Catastrophe Losses Impact Trajectory of Premium Growth 51 Net Premium Growth: Annual Change, 1971—2015E (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, and 4.2% in 2009, the First 3-Year Decline Since 1930-33. 20% PostAndrew spike 15% 2015E: 3.9% 10% 2014: 4.1% 2013: 4.4% 2012: +4.3% 5% 0% Post-Katrina spike 71 72 73 74 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 08 09 10 11 12 13 14 15E -5% Shaded areas denote “hard market” periods Sources: A.M. Best (historical and forecast), ISO, Insurance Information Institute. 52 Insurance Information Institute Online: www.iii.org Thank you for your time and your attention! Twitter: twitter.com/bob_hartwig 53 Follow-up Information Sharon Cooper – Media Spokesperson Munich Reinsurance America, Inc. © 2015 Munich Re Source: FEMA Question and Answer © 2015 Munich Re Press Question and Answer Process To ask a question, please dial 1 4 on your phone. An operator will facilitate your participation. © 2015 Munich Re 56 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.munichre.us/wrap © 2015 Munich Re 57 MR NatCatSERVICE The world‘s largest database on natural catastrophes NatCatSERVICE Downloadcenter 1 200 1 000 800 600 Annual statistics Long-term statistics Information on significant natural disasters Focus analyses NatCatSERVICE methodology, info brochure Publication Topics Geo 400 200 1980 1982 1984 1986 1988 1990 1992 1994 1996 1998 2000 2002 2004 2006 2008 2010 500% 450% 400% 350% 300% www.munichre.com/natcatservice/downloadcenter/en 250% 200% 150% 100% 50% 0% 1980 1982 1984 1986 1988 1990 1992 1994 1996 1998 2000 2002 2004 2006 2008 2010 © 2015 Munich Re 58 More Information Connect with Munich Re Connect with I.I.I. Twitter @Munichre_US @MunichRe_In @iiiorg LinkedIn munich-reinsurance-america-inc. Insurance Information Institute Google+ Munich Re (US) Munich Re Insurance Information Institute YouTube MunichReUs MunichReVideo iiivideo Facebook Munichreus1 Munichre InsuranceInformationInstitute Flickr iiiorg © 2015 Munich Re 59 Press Inquiries Sharon Cooper Phone: +1 (609) 243-8821 [email protected] © 2015 Munich Re 60 Natural Catastrophe Review Webinar First Half of 2015 July 14, 2015 © 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 written permission of Munich Reinsurance America, Inc. This material is not intended to be legal, underwriting, financial, or any other type of professional advice. Any descriptions of coverage reflected in this presentation are meant to be general in nature and do not include and are not intended to include all of the actual terms, benefits and limitations found in an insurance policy. Only the insurance policy will form the contract between the insured and insurance company, and governs in all cases.