A number of devastating earthquakes and powerful storms made 2016 the costliest twelve months for natural catastrophe losses in the last four years. This is according to a study by Munich RE which showed that losses totalling US$175bn, a good two-thirds more than in the previous year, and very nearly as high as the figure for 2012 (US$180bn). The share of uninsured losses – the so-called protection or insurance gap – remained substantial at around 70%.
The high number of flood events, including river flooding and flash floods, was exceptional and accounted for 34% of overall losses, compared with an average of 21% over the past ten years. Taking very small events out of the equation, 750 relevant loss events such as earthquakes, storms, floods, droughts and heatwaves were recorded in the Munich Re NatCatSERVICE database, and this is significantly above the ten-year average of 590.
“After three years of relatively low nat cat losses, the figures for 2016 are back in the mid-range, where they are expected to be. Losses in a single year are obviously random and cannot be seen as a trend”, said member of the Board of Management Torsten Jeworrek. “The high percentage of uninsured losses, especially in emerging markets and developing countries, remains a concern.”
While the digital threats may be seen as the greatest concern to business continuity professionals, according to the Business Continuity Institute’s latest Horizon Scan Report, that's not to say that threats of a more physical nature don't exist. Adverse weather featured as a top ten threat with more than half of respondents (55%) to a global survey expressing concern about the prospect of this threat materialising, while a quarter expressed concern about the possibility of an earthquake/tsunami.
Earthquake in Japan most expensive natural catastrophe of 2016
The costliest natural catastrophes of the year occurred in Asia where there were two earthquakes on the southern Japanese island of Kyushu close to the city of Kumamoto in April (overall losses US$31bn; proportion of insured losses just under 20%), and devastating floods in China in June and July (overall losses US$20bn; only some 2% of which were insured).
North America was hit by more loss occurrences in 2016 than in any other year since 1980, with 160 events recorded. The year’s most serious event here was Hurricane Matthew which had its greatest impact on the Caribbean island nation of Haiti, which was still struggling to recover from the 2010 earthquake. Matthew killed around 550 people in Haiti, and also caused serious damage on the east coast of the USA. Overall losses totalled US$10.2bn, with over a third of this figure insured.
Series of storms in Europe, wildfires in Canada
North America was also impacted by other extreme weather hazards, including wildfires in the Canadian town of Fort McMurray in May, and major floods in the southern US states in the summer. In Canada, the mild winter with less snow than usual, and the spring heatwaves and droughts which followed, were the principal causes of the devastating wildfires that hit the provine of Alberta, generating overall losses of US$4bn. More than two-thirds of this figure was insured. In August, floods in Louisiana and other US states following persistent rain triggered losses totalling US$10bn, only around a quarter of which was insured.
There was a series of storms in Europe in late May and early June and torrential rain triggered numerous flash floods, particularly in Germany, and there was major flooding on the River Seine in and around Paris. Overall losses totalled some US$6bn, around half of which was insured.
“A look at the weather-related catastrophes of 2016 shows the potential effects of unchecked climate change. Of course, individual events themselves can never be attributed directly to climate change. But there are now many indications that certain events – such as persistent weather systems or storms bringing torrential rain and hail – are more likely to occur in certain regions as a result of climate change”, explained Peter Höppe, Head of Munich Re’s Geo Risks Research Unit.
The findings of this study, and the costly impact of natural catastrophes that it highlights, shows just how important it is for organizations to practice effective business continuity management. This won't negate the likelihood or consequence of such an event, but it will ensure that, should one occur, plans and processes are in place to enable the organization to manage through it, limit the impact and make sure that at least the priority activities can be carried out.