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International Economic Outlook &
the Middle East Region’s Role in
the World Economy
Insurance & Reinsurance Market Implications
Multaqa Qatar 2012
Doha, Qatar
13 March 2012
Download at www.iii.org/presentations
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
Presentation Outline
 Global Economic Overview & Outlook





International Overview
Emerging vs. Developing Markets
Middle East Focus
(Re) Insurance Implications
Implications of the Persistent Low Yield Environment for (Re)Insurers
 Oil and Energy Market Overview
 Price Trends
 Long-Term Supply, Demand and Infrastructure Considerations
 Insurance Implications
 The Unfortunate Nexus of Opportunity, Risk and Uncertainty
 The Fusion of Economic and (Geo)Political Risk
 Top 10 Risks for the Global Economy
 Global Catastrophe Loss Trends and Threats
 Was 2011 an Aberration or a Foreshadowing of the Future
2
Global Economic Outlook:
Regional and Major Economy
Perspectives
Strength of Economies Varies Greatly as
Does Pace of Recovery from the
Challenges of 2011
Important Consequences for Insurer and
Reinsurer Growth Opportunities
3
1.8%
Rebuilding
acts as a
stimulus to
Japanese
economy
1.8%
8.5%
9.2%
1.5%
1.0%
0.4%
3.0%
China growth
has slowed, but
remains strong
in an expected
“soft landing”
scenario
1.6%
2.6%
0.4%
2%
2.2%
4%
1.7%
6%
0.9%
8%
US
recovery
continues
The Eurozone
and UK are in
recession.
Both should
end in
Q3:2012
1.8%
10%
8.2%
Real GDP Growth Forecasts:
Major Economies: 2011 – 2013F
0%
-0.4%
-0.8%
-2%
US
UK
Euro Area
2011
2012F
Germany
China
Japan
2013F
Growth Prospects Vary Widely by Region: Brightening in the US,
Mild Recession in the Eurozone, A “Soft Landing” in China, Strength in
India, Reconstruction Stimulus in Japan and Modest Growth in
America’s Largest Trading Partners—Canada and Mexico.
Sources: Blue Chip Economic Indicators (2/2012 issue); Insurance Information Institute.
4
5.3%
5.5%
4.9%
5.3%
5.6%
4.8%
5.2%
3.5%
3.3%
4.1%
4.0%
2.4%
1.1%
5.1%
4.5%
3.6%
3.2%
3.1%
4.3%
6.9%
Middle East Region has
seen growth slow with
political upheaval in
several nations
8.0%
7.0%
3.9%
4%
2%
3.3%
6%
3.8%
10%
8%
5.2%
12%
7.1%
9.9%
Real GDP Growth Forecasts: Emerging
Market Regions: 2010 – 2013F
0%
World
Output
India
Middle
East &
North
Africa*
2010
Central &
Eastern
Europe
2011
2012F
Russia
ASEAN-5**
SubSaharan
Africa
2013F
Growth Prospects Vary Widely by Region: All Regions Slowed in 2011 As
Economic Recovery Encountered Many Challenges. IMF Outlook for
2012 Is Mixed With Broader, More Robust Growth in 2013 Predicted.
Actual Growth in 2012 Could Surprise to the Upside.
*Excludes Libya in 2011. **Indonesia, Malaysia, Thailand, Philippines and Vietnam
Sources: IMF World Economic Outlook (Jan. 24, 2012 update); Insurance Information Institute.
5
GDP Growth: Advanced & Emerging
Economies vs. World, 1970-2013F
GDP Growth (%)
10.0
8.0
World output is forecast to grow by
3.3% in 2012 and 3.9% in 2013. The
world economy shrank by 0.6% in
2009 amid the global financial crisis
Emerging economies (led
by China) are expected to
grow by 5.4% in 2012 and
5.9% in 2013.
6.0
4.0
2.0
(2.0)
(4.0)
Advanced economies are expected
to grow at a sluggish pace of 1.2% in
2012 and 1.9% in 2013.
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
12F
13F
0.0
Advanced economies
Emerging and developing economies
World
Source: International Monetary Fund, World Economic Outlook Update, Jan. 2012; Ins. Info. Institute.
Relative Shares of Global Output,
Advanced vs. Developing Economies, 2009
The gap is closing quickly. China
became the world’s second largest
economy in 2010 and before long the
developing world’s share of GDP will
exceed that of advanced economies.
Developing
Economies
47.1%
Advanced
Economies
52.9%
Source: EDC Economics, “The Moment of Truth: Global Export Forecast Fall 2010, at http://www.edc.ca/english/docs/gef_e.pdf
7
Current Real GDP Growth vs. Pre-Crisis
Average (2000-2007 vs. 2011F-2012F*)
The US, Europe and
Eurasia have seen
significant slowdowns
Latin and South
American markets are
in general growing
more strongly than
prior to the crisis
Parts of the Middle
East and South Asia
have done well
*Percentage point difference between compound annual rates of change 2000-2007 vs. forecasts for 2011-2012.
Source: IMF, World Economic Outlook, September 2011; Insurance Information Institute.
8
Current Real GDP Growth vs. Pre-Crisis
Average (2000-2007 vs. 2011F-2012F*)
Growth in much
of Europe today
is about 2 pts.
Lower than precrisis
*Percentage point difference between compound annual rates of change 2000-2007 vs. forecasts for 2011-2012.
Source: IMF, World Economic Outlook, September 2011; Insurance Information Institute.
9
INVESTMENTS:
THE NEW REALITY
How Much of a Threat Are
Persistently Low Interest
Rates for (Re)Insurers?
10
Reinsurer Investments: Bonds Are Safe
but Vulnerable to Low Yield Environment
Asset Allocation of Reinsurer Investment Portfolio
(As of September 30, 2011)
Reinsurer (and primary
insurer) portfolios are
overwhelming weighted
toward fixed income
securities
Source: Guy Carpenter; Insurance Information Institute.
Treasury Yield Curves:
Pre-Crisis (July 2007) vs. Feb. 2012
6%
5%
4%
3%
2%
4.82%
4.96%
5.04%
4.96%
4.82%
4.82%
4.88%
Treasury yield curve remains
near its most depressed level
in at least 45 years.
Investment income will fall as
a result. Fed is unlikely to
hike rates until well into 2014.
5.00%
4.93%
5.00%
5.19%
3.11%
2.75%
1.97%
1.37%
0.83%
1%
0.06%
0.09%
0.12%
0.16%
0.28%
1M
3M
6M
1Y
2Y
0.38%
February 2012 Yield Curve
Pre-Crisis (July 2007)
0%
3Y
5Y
7Y
10Y
20Y
30Y
The Fed Is Actively Signaling that it Is Determined to Keep Rates Low
Through Late 2014
Source: Federal Reserve Board of Governors; Insurance Information Institute.
12
3-Month Interest Rates for
Major Global Economies, 2008-2012F
0.2%
0.2%
0.1%
0.1%
1.3%
2.0%
0.7%
0.8%
0.9%
0.7%
0.3%
0.6%
0.2%
0.2%
0.2%
0.9%
1.1%
0.9%
1.8%
0.7%
2.0%
1.0%
2.1%
3.0%
1.4%
2.9%
4.0%
1.0%
0.9%
1.1%
0.9%
5.0%
2.5%
6.0%
2008
2009
2010
2011
2012F
4.9%
5.5%
Interest rates remain
generally low in much of the
world, depressing insurer
investment earnings.
Central banks in many
countries, including the US,
are intentionally holding
rates low.
0.0%
Euro Area
Japan
UK
Source: Blue Chip Economic Indicators, Feb. 2012 edition.
China
Netherlands
US
Reduction in Combined Ratio Necessary to Offset
1% Decline in Investment Yield to Maintain
Constant ROE, by Line*
s
ne
i
L
-5.7%
-5.2%
-4.3%
Suggests that reinsurers need to
reduce their combined ratio by more
than 7 points to offset a 1% decline in
yield to maintain the same ROE
-3.7%
-3.3%
-3.3%
-3.1%
-2.1%
-1.9%
-3.6%
-2.0%
-1.8%
0%
-1%
-2%
-3%
-4%
-5%
-6%
-7%
-8%
-1.8%
y
l
es
et
o
p
t
r
a
s
n
i
o
u
a
Li
rc
Au
s
op
ty
Pr
C
al
/S
al
r
e
l
s
s
n
y
n
t
a
t
P
u
M
m
m
m
m
l
o
li
ra
di
rs
rs
rp
tP
C
ar
ed
de
om
om
re
om
om
e
v
e
u
i
P
P
P
C
C
C
C
C
F
W
S
M
W
to
u
A
R
ra
u
ns
ei
**
e
nc
-7.3%
Lower Investment Earnings Place a Greater Burden on
Underwriting and Pricing Discipline
*Based on 2008 Invested Assets and Earned Premiums
**US domestic reinsurance only
Source: A.M. Best; Insurance Information Institute.
14
Focus on Middle East
Economies
Economic Experiences of Middle East
Countries Varies Widely
15
Real GDP Growth: World vs. Middle East,
Region, 1980-2016F
First Gulf War—
Record oil prices
caused Middle East
GDP to surge
GDP growth in the
Middle East has
generally outperformed
the world as a whole
for the past 20 years
IMF expects
Middle East
growth to
normalize
2012-2016
Source: IMF; Insurance Information Institute.
16
Real GDP Growth: Key Middle Eastern
States, Including Qatar, 1980-2016F
Qatar GDP growth has
generally outperformed
the Middle East region
over the past 15 years
(since 1996)
IMF expects Iraq to be
the regions growth
leader through 2016
(effect of starting from
a small base GDP)
Kuwait during
first Gulf War
Source: IMF; Insurance Information Institute.
17
Real GDP Growth Forecasts: Emerging
Market Regions: 2010 – 2013F
14%
Qatar is the true
growth leader in 2012
as Iraq starts from a
very low base
12.6%
12%
10%
9.8%
8%
6.0%
6%
4.9%
4.9%
4.0%
4%
3.8% 4.2%
3.6%
4.2%
3.6% 3.8%
5.0%
4.6%
3.4%
1.4%
2%
0%
Iraq
Qatar
World
2012F
UAE
Bahrain
Oman
Iran
Syria
2016F
Growth Prospects Vary Widely Throughout the Middle East.
Sources: IMF World Economic Outlook (Jan. 24, 2012 update); Insurance Information Institute.
18
Oil Demand Will Rise, Oil
Prices Will Rise Still Faster
Long-Run Demand and Price Dynamics
Remain Strong for Oil and
Associated Insurance Markets
19
Commodity Price Changes Including
Oil, Jan. 2010- Jan. 2012*
Index (Jan 3, 2006 = 100)
Crude peaked in
Q2:2011, fell
significantly in late
2011 but has since
risen again
300
250
Raw materials prices
more than doubled
over the course of
2010-2011.
200
150
50
1-Jan-10
15-Jan-10
29-Jan-10
12-Feb-10
26-Feb-10
12-Mar-10
26-Mar-10
9-Apr-10
23-Apr-10
7-May-10
21-May-10
4-Jun-10
18-Jun-10
2-Jul-10
16-Jul-10
30-Jul-10
13-Aug-10
27-Aug-10
10-Sep-10
24-Sep-10
8-Oct-10
22-Oct-10
5-Nov-10
19-Nov-10
3-Dec-10
17-Dec-10
31-Dec-10
14-Jan-11
28-Jan-11
11-Feb-11
25-Feb-11
11-Mar-11
25-Mar-11
8-Apr-11
22-Apr-11
6-May-11
20-May-11
3-Jun-11
17-Jun-11
1-Jul-11
15-Jul-11
29-Jul-11
12-Aug-11
26-Aug-11
9-Sep-11
23-Sep-11
7-Oct-11
21-Oct-11
4-Nov-11
18-Nov-11
2-Dec-11
16-Dec-11
30-Dec-11
13-Jan-12
100
Metals
Food
Raw Materials
Crude Oil (APSP)
*Data are through January13, 2012
Source: International Monetary Fund World Economic Outlook January 2012 update at
http://www.imf.org/external/pubs/ft/weo/2012/update/01/index.htm ; Insurance Information Institute.
Gold
20
$120
$110
$80
$70
$60
$50
4-Jan-10
18-Jan-10
1-Feb-10
15-Feb-10
1-Mar-10
15-Mar-10
29-Mar-10
12-Apr-10
26-Apr-10
10-May-10
24-May-10
7-Jun-10
21-Jun-10
5-Jul-10
19-Jul-10
2-Aug-10
16-Aug-10
30-Aug-10
13-Sep-10
27-Sep-10
11-Oct-10
25-Oct-10
8-Nov-10
22-Nov-10
6-Dec-10
20-Dec-10
3-Jan-11
17-Jan-11
31-Jan-11
14-Feb-11
28-Feb-11
14-Mar-11
28-Mar-11
11-Apr-11
25-Apr-11
9-May-11
23-May-11
6-Jun-11
20-Jun-11
4-Jul-11
18-Jul-11
1-Aug-11
15-Aug-11
29-Aug-11
12-Sep-11
26-Sep-11
10-Oct-11
24-Oct-11
7-Nov-11
21-Nov-11
5-Dec-11
19-Dec-11
2-Jan-12
16-Jan-12
30-Jan-12
13-Feb-12
27-Feb-12
Crude Oil Price Changes,
Jan. 2010- 6 Mar. 2012*
$ Price per Barrel
$140
2012 Peak =
$126.68 on
5 March
$130
2011 Peak =
$126.46 on
11 April
$100
$90
A sustained $10 rise in the price
of oil reduces global GDP by
approximately 0.2% in Year 1
and 0.5% in Year 2.
*Europe Brent Spot FOB price.
Source: US Energy Information Administration update at http://www.eia.gov/dnav/pet/pet_pri_spt_s1_d.htm ; Insurance Information Inst.
21
Global Oil Consumption and Price,
2008 – 2035F
$124.94
$124.68
140
110.8
120
109.1
107.6 $124.53
$124.20
106.1
$123.71
104.5
$123.09
103.2
$122.30
101.8
$121.34
100.5
$120.25
99.3
$118.99
98.2
$117.54
97.1
$115.96
96.1
$112.36
$114.21
95.1
93.5
92.9
92.5
92.0
91.5
91.1
90.4
90.3
88.9
87.4
86.0
Nominal Price/BBL
100
80
60
Global oil consumption is
expected to rise by 1.1% per
year on average through 2035
40
20
Total Consumption
2034
2035
2030
2031
2032
2033
2026
2027
2028
2029
2022
2023
2024
2025
2018
2019
2020
2021
0
2014
2015
2016
2017
80
2010
2011
2012
2013
85
2008 85.5
2009 83.7
90
89.6
95
94.3
$110.30
$108.10
$103.15
$100.50
$97.62
$94.58
$91.38
$88.03
$85.73
$83.21
$78.03
100
$61.66
105
$100.51
110
$105.71
The nominal price of oil is
expected to rise by 2.8% per year
on average through 2035
Millions of Barrels per Day
Nominal Price (Light, Low Sulfur Crude)
Oil Will Become Relatively More Expensive Over Time, With Price
Increases Outstripping Income Growth in Many Parts of the World
*
Source: US Energy Information Administration; Insurance Information Institute
Much Uncertainty Exists in the
World, But Energy Demand
Grows Under All Scenarios
Energy is One of the Few Major
Markets/Industries With Clear
Growth Long-Term Trends
23
World Primary Energy Consumption,
1990-2030P
Quadrillion BTUs
800
678.3
700
637.3
595.7
600
551.5
462.1
500
400
300
200
100
472.4
508.3
347.7
Between 2006 and 2030,
energy consumption in
projected to increase
annually by 1.5% worldwide
but only 0.5% in the US
Global energy
consumption is
expected to increase by
33.4% between 2010 and
2030 but by only 12% in
the US
0
1990
2005
2006
2010P
2015P
2020P
2025P
Source: Energy Information Administration, 2009 International Energy Outlook, Insurance Information Institute.
2030P
Avg. Annual Change in Total Energy
Consumption by Country/Region:2006-2030P
Average Annual Change in Consumption (Quadrillion BTUs)
3.5%
3.2%
3.0%
US/Europe have the slowest
growth rates for energy
consumption through 2030,
growing at less than 1/6 the rate
in China and 1/5 that of India
2.6% 2.5%
2.5%
2.0%
1.5% 1.4%
1.2% 1.1%
1.5%
1.0%
0.9%
0.5% 0.5%
0.5%
Source: Energy Information Administration, 2009 International Energy Outlook, Ins. Info. Institute
Europe
(OECD)
US
Russia
Aust/NZ
Mexico
S. Korea
Canada
India
Brazil
China
0.0%
25
Global Oil Demand and Production,
by Region
Percentage Change (%)
-6.0%
-8.0%
Advanced
Economies
1.9%
2.0%
0.8%
-0.3%
0.7%
-5.8%
-4.0%
-0.6%
-2.0%
-3.5%
-4.0%
0.0%
-0.2%
2.0%
-0.4%
1.5%
4.0%
3.3%
4.4%
2.9%
2.2%
5.1%
3.5%
6.0%
2.2%
4.8%
OIL PRODUCTION
OIL DEMAND
Emerging
Economies
2007
2008
OPEC
2009
2010
Non-OPEC
2011P
Oil Demand in Advanced Economies is Weak but Production Gains
Continue to Satisfy Demand in Emerging Countries
Source: IMF, World Economic Outlook, Sept. 2011; Insurance Information Institute.
26
US Natural Gas Production and Non-Hydro
Renewable Electricity Generation, 1990-2035P
Shale gas production is
expected to grow
rapidly in the US
Wind is expected to account
for the majority of renewable
electricity generation
Tight gas production
involves controversial
hydraulic fracturing
(fracking) techniques
Source: US Energy Information Administration, Annual Energy Outlook 2011; Insurance Information Institute.
27
World Net Effective Electric Power
Generation, 1990-2030P
Trillions of Kilowatt
Hours
35
31.8
28.9
30
26.0
25
23.2
20.6
20
18.0
14.6
15
11.3
Global electric power generation
was dampened about 3% by the
global financial crisis, but will still
grow at 2.9% per year through 2030
compared to 1.9% for total energy
consumption
12.6
10
5
0
1990
1995
2000
2006
2010
2015
2020
2025
Source: Energy Information Administration, 2009 International Energy Outlook, Insurance Information
2030
Massive Investments in
Global Energy
Infrastructure Are Needed
Upgrading the World’s Antiquated
Energy Infrastructure is Also
Critical for Future Energy Security
29
Cumulative Projected Investment in
Global Energy Infrastructure, 2011-2035 ($ Trill.)
Projected energy
infrastructure investment
through 2035 total $38
trillion; Implies substantial
incurrence of risk.
Natural
Gas, $9.5 ,
25%
Coal, $1.1 ,
3%
Biofuels,
$0.3 , 1%
Power,
$16.9 , 44%
Oil, $10.1 ,
27%
Source: International Energy Agency, World Energy Outlook 2011.
The Unfortunate Nexus:
Opportunity, Risk & Instability
Most of the Global Economy’s Future
Gains Will be Fraught with Much
Greater Risk and Uncertainty than in
the Past
31
Global Real (Inflation Adjusted) Nonlife
Premium Growth: 1980-2010
Average: 1980-2010
Real growth rates
Industrialized Countries: 3.8%
Emerging Markets: 9.2%
20%
Overall Total: 4.2%
Nonlife premium growth in
emerging markets has
exceeded that of
industrialized countries in
27 of the past 31 years,
including the entirety of the
global financial crisis..
15%
10%
5%
0%
-10%
Real nonlife premium growth is very erratic in
part to inflation volatility in emerging markets as
well as a lack of consistent cyclicality
1980
1981
1982
1983
1984
1985
1986
1987
1988
1989
1990
1991
1992
1993
1994
1995
1996
1997
1998
1999
2000
2001
2002
2003
2004
2005
2006
2007
2008
2009
2010
-5%
Total
Source: Swiss Re, sigma, No. 2/2010.
Industrialised countries
Emerging markets
32
Nonlife Real Premium Growth in 2010
Latin and South American
markets performed
relatively well during and
after the global financial
crisis in terms of growth
Source: Swiss Re, sigma, No. 2/2011.
There was also growth
in the Middle East, East
and South Asia as well
as Australia and New
Zealand
33
Nonlife Real Premium Growth Rates
by Region: 2000-2009 and 2010
Real Premium Growth Rates
World
World
Every
emerging
market region
except Central
and Eastern
Europe
experienced
growth during
the financial
crisis and into
2010
Industrialised countries
countries
Industrialised
North America
America
North
Western Europe
Europe
Western
Continental Europe
Europe
Continental
and newly industrialised Asian economies
JapanJapan
and newly
industrialised Asian economies
Oceania
Oceania
Emerging markets
Emerging markets
South and East Asia
South and East Asia
Latin America and the Caribbean
Latin America and the Caribbean
Central and Eastern Europe
Central and Eastern Europe
Africa
Africa
Middle East and Central Asia
Middle East and Central Asia
-4%
-12%
The Middle East and many emerging
market economies continued to grow
during the global financial crisis and
continued to benefit from foreign
direct investment
Source: Swiss Re, sigma, No. 2/2011.
0%
-8%
4%
-4%
8%
12%
16%
20%
24%
0%
4%
8%
12%
16%
2009growth rate 2000-2009
Growth rate 2010Growth
Annualrate
average
Annual average growth rate 1999-2008
34
Distribution of Nonlife Premium:
Industrialized vs. Emerging Markets, 2009
2009, $Billions
Premium Growth Facts
 Although premium growth
throughout the industrialized
world was negative in 2009, its
share of global nonlife
premiums remained very high
at nearly 86%--accounting for
nearly $1.5 trillion in premiums.
 The financial crisis and sluggish
recovery in the major insurance
markets will accelerate the
expansion of the emerging
market sector
Industrialized
Economies
$1, 485.8
85.7%
14.3%
Emerging
Markets
$248.8
Developing markets now
account for 47% of global
GDP but just 14% of nonlife
premiums
Sources: Swiss Re; Insurance Information Institute research.
35
Political Risk in 2011/12: Greatest Business
Opportunities Are Often in Risky Nations
The fastest growing
markets are generally
also among the politically
riskiest, including East
and South Asia
Much of the middle East
and North Africa have
experienced and
continue to experience
political turmoil
Source: Maplecroft
Heightened risk
has economic
and insurance
implications
36
The “Arab Spring” Has Increased Uncertainty
in an Already Volatile Part of the World
Arab Spring
‫الربيع العربي‬
Some energy-rich nations
have been among the most
unstable in 2011/12
Longer-run,
significant
investment and
insurance
opportunities
exist throughout
the region
Government overthrown
Sustained civil disorder and governmental changes
Protests and governmental changes
Major protests
Minor protests
Protests outside the Arab world
Source: Wikipedia as of Nov. 7, 2011; Insurance Information Institute research.
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Summary of 10 Greatest Potential Threats
to Global Economy as of March 2012
1. Armed Conflict in the Middle East, Disrupting Oil Markets



A conflict between Iran and Israel viewed by some as imminent
$200/bbl oil is possible; Severe supply disruptions
Resultserious damage to the global economy, killing fragile recovery
2. Rising Oil Prices


Even in the absence of armed conflict, oil prices slowing growth
Sustained $10/bbl increase  -0.2% on global GDP
3. Sovereign Debt Concerns in Europe (was #1 threat in 2011)


Contagion spreads beyond GreeceItaly, Spain, Portugal, etc.
Greek/EU political/economic solution fails resulting in disorderly default
4. “Hard Landing” of Chinese Economy

A sharp decline in China’s GDP would damage global economies
5. Mega-Catastrophe Trends Continue at Record Pace


6.
7.
8.
9.
10.
Catastrophes trimmed 0.5% off global GDP in 2011
Massive disruptions to fragile global supply chains
Sudden Weakening of US Economy
Intensification of Geopolitical Instability (esp. in Middle East)
Disintegration of Eurozone (Political Failure)
Commodity Price Inflation (apart from oil)
Large-Scale Cyber Attack/Terrorism Attack (including cyberterror)
38
Global Catastrophe Loss
Developments and Trends
2011 Rewrote Catastrophe Loss and
Insurance History
But Will Losses Turn the Market?
39
Global Catastrophe Loss Summary:
2011
 2011 Was the Highest Loss Year on Record for Economic Losses Globally
 Extraordinary accumulation of severe natural catastrophe: Earthquakes, tsunami, floods
and tornadoes are the primary causes of loss
 $380 Billion in Economic Losses Globally (New Record)
 New record, exceeding the previous record of $270B in 2005
 $105 Billion in Insured Losses Globally
 2011 losses were 2.5 times 2010 insured losses of $42B
 Second only to 2005 on an inflation adjusted basis (new record on a unadjusted basis)
 Over 5 times the 30-year average of $19B
 $72.8 Billion in Economic Losses in the US
 Represents a 129% increase over the $11.8 billion amount through the first half of 2010
 $35.9 Billion in Insured Losses in the US Arising from 171 CAT Events
 Fifth highest year on record
 Represents 51% increase over the $23.8 billion total in 2010
Source: Munich Re; Insurance Information Institute.
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Natural Loss Events, 2011
World Map
Winter Storm Joachim
France, Switzerland,
Germany, 15–17 Dec.
Wildfires
Canada, 14–22 May Severe storms, tornadoes
USA, 20–27 May
Hurricane Irene
USA, Caribbean
22 Aug.–2 Sept.
Floods
USA, April–May
Drought
Severe
storms, tornadoes
USA, Oct. 2010–
USA,
22–28
April
ongoing
Flash floods, floods
Italy, France, Spain
4–9 Nov.
Earthquake
Turkey
23 Oct.
Earthquake, tsunami
Japan, 11 March
Wildfires
USA, April/Sept.
Floods
Pakistan
Aug.–Sept.
Floods, flash floods
Australia,
Dec. 2010–Jan. 2011
Landslides, flash floods
Brazil, 12/16 Jan.
Natural catastrophes
Selection of significant
loss events (see table)
Source: MR NatCatSERVICE
Cyclone Yasi
Australia, 2–7 Feb.
Floods
Thailand
Aug.–Nov.
Floods, landslides
Guatemala, El Salvador
11–19 Oct.
Number of Events: 820
Tropical Storm Washi
Philippines, 16–18 Dec.
Drought
Somalia
Oct. 2010–Sept. 2011
Geophysical events
(earthquake, tsunami, volcanic activity)
Meteorological events
(storm)
Earthquake
New Zealand, 22 Feb.
Earthquake
New Zealand, 13 June
Hydrological events
(flood, mass movement)
Climatological events
(extreme temperature, drought, wildfire)
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Natural Catastrophes Worldwide 2011
Insured losses US$ 105bn - Percentage distribution per continent
2%
44%
In 2011, just 37% of
insured natural
catastrophe losses
were in the
Americas, barely half
the average of 66%
over the prior 30
years (1981-2010)
Continent
America (North and South
America)
Europe
Africa
37%
<1%
17%
Insured losses
US$ m
40,000
2,000
Minor damages
Asia
45,000
Australia/Oceania
18,000
In 2011, 61% of insured
natural catastrophe losses
were in the Asia/Pacific
region, nearly 3.5 times the
average of 13% over the
prior 30 years (1981-2010)
Source: MR NatCatSERVICE
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Natural Catastrophes Worldwide 1980 – 2011
Insured losses US$ 870bn - Percentage distribution per continent
16%
13%
66%
<1%
5%
Continent
America (North and South
America)
Europe
Africa
Asia
Australia/Oceania
Insured losses
US$ m
566,000
146,000
2,000
115,000
41,000
In 2011, 61% of natural
catastrophe losses were
in the Asia/Pacific region,
nearly 3.5 times the
average of 13% over the
prior 30 years (1981-2010)
Source: MR NatCatSERVICE
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43
Worldwide Natural Disasters 1980–2011,
Overall and Insured Losses
(Insured Losses, 2011 Dollars, $ Billions)
2011
400
Overall Losses: $380 Bill
350
Insured Losses: $105 Bill
300
250
200
150
100
50
1980
1982
1984
1986
1988
1990
1992
1994
1996
1998
2002
2004
2006
2008
2010
Insured losses (in 2011 values)
Overall losses (in 2011 values)
Source: MR NatCatSERVICE
2000
© 2011 Munich Re
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Top 16 Most Costly World Insurance
Losses, 1970-2011**
(Insured Losses, 2011 Dollars, $ Billions)
$50
$45
$40
$35
$30
$25
$20
$15
$10
$5
$0
Large catastrophes in
Asia/Pacific and South
America Have dominated
mega-losses since 2010
5 of the top 14 most
expensive
catastrophes in world
history have occurred
within the past 2 years
$47.6
$37.5
$19.1
$9.7
$7.7 $8.1 $8.3 $8.5 $9.3
Hugo
(1989)
Winter
Storm
Daria
(1991)
Chile
Quake
(2010)
Ivan
Typhoon Charley
(2004) Mirielle (2004)
(1991)
$21.3
$24.0 $25.0
$11.9 $13.0 $13.0 $13.1
Wilma Thailand New Ike
Northridge Spring WTC
(2005) Floods Zealand (2008) (1994)Tornadoes/ Terror
(2011) Quake
Storms Attack
(2011)
(2011) (2001)
*Average of range estimates of $35B - $40B as of 1/4/12; Privately insured losses only.
**Figures do not include federally insured flood losses.
Sources: Swiss Re sigma 1/2011; Munich Re; Insurance Information Institute research.
Andrew Japan Katrina
(1992) Quake, (2005)
Tsunami
(2011)*
45
Worldwide Natural Disasters,
1980 – 2011
Number of Events
There were 820
events in 2011
1 200
1 000
800
600
400
200
1980
1982
1984
Geophysical events
(Earthquake, tsunami,
volcanic eruption)
Source: MR NatCatSERVICE
1986
1988
1990
1992
1994
Meteorological events
(Storm)
1996
1998
2000
2002
Hydrological events
(Flood, mass
movement)
2004
2006
2008
2010
Climatological events
(Extreme temperature,
drought, forest fire)
46
Natural Catastrophes in Asia 1980 – 2011
Overall and insured losses in 2011 Dollars
($ Billions)
2011 set a record for both
overall economic losses
in Asia ($266B) and
insured losses ($45B).
The rapid economic
development of Asia and
increased insurance
penetration guarantee
that losses will trend
higher in the future.
200
180
160
140
120
100
80
60
40
20
1980
1982
1984
1986
1988
1990
1992
1994
1996
Overall losses (in 2011 values)
Source: MR NatCatSERVICE
1998
2000
2002
2004
2006
2008
2010
Insured losses (in 2011 values)
© 2011 Munich Re
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Insurance Information Institute Online:
www.iii.org
Thank you for your time
and your attention!
Twitter: twitter.com/bob_hartwig
Download at www.iii.org/presentations
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