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© 2015 Munich Re
IntroductionSharon Cooper
Press Spokesperson, Munich Re America
US Natural Catastrophe UpdateCarl 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 LossesDr. Robert Hartwig
President & Economist, Insurance Information Institute
Agenda
2
© 2015 Munich Re
You will have an opportunity to ask questions at the conclusion of the presentation.
An operator will facilitate your participation.
Webinar Interactivity
3
@Munichre_US @lworters @iii
Questions and Answers
#NATCAT2015
Live Tweeting
© 2015 Munich Re
Click icon to add picture
US Natural Catastrophes - First Half of 2015Carl Hedde, Head of Risk AccumulationMunich Reinsurance America, Inc.
Source: FEMA
© 2015 Munich Re
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
5
US Natural Catastrophe Update
© 2015 Munich Re
Natural disaster losses in the U.S. 2015Based on perils (January – June only)
As of July 1, 2015
Number of
Events FatalitiesEstimated Overall Losses (US $m)
Estimated Insured Losses (US $m)*
Severe Thunderstorm 38 66 7,000 5,100
Winter Storms & Cold Waves 11 80 3,800 2,900
Flood, Flash Flood 10 4 500 150
Earthquake & Geophysical 1 - - -
Tropical Cyclone 2 4 100 60
Wildfire, Heat Waves, & Drought
18 - 1,300 Minor market loss
Totals 80 154 12,600 8,200
6
US Natural Catastrophe Update
*Source: Property Claim Services (PCS) as of 7.7.2015
© 2015 Munich Re
Loss events in the U.S. 1980 – 2015Number of events (January – June only)
7
US Natural Catastrophe Update
Meteorological events(Tropical storm, extratropical storm, convective storm, local storm)
Hydrological events(Flood, mass movement)
Climatological events(Extreme temperature, drought, forest fire)
Geophysical events(Earthquake, tsunami,
volcanic activity)
Number
Source: Munich Re, NatCatSERVICE
1
47
10
22
First Six Months in 2015 80 Events
© 2015 Munich Re
Loss events in the U.S. 1980 – 2015Overall and insured losses (January – June only)
8
US Natural Catastrophe Update
*Losses adjusted to inflation based on country CPI
Overall losses totaled US$ 12.6bn; Insured losses totaled US$ 8.2bnbn US$
Overall losses (in 2015 values)*
Insured losses (in 2015 values)*
Source: Munich Re, NatCatSERVICE
© 2015 Munich Re
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)
US Natural Catastrophe Update
11
© 2015 Munich ReSource: Property Claims Service; MR NatCatSERVICE
Winter stormsFirst 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 $2.9 billion, largest total in terms of original loss dollars
US Natural Catastrophe Update
Source: FEMA
12
© 2015 Munich Re
Preliminary tornado counts for first half of 2015 about 200 below the 2005-2014 average.
Tornado counts in April (185) and May 2015 (414) were much higher than in 2014.
ThunderstormsTornado Count for First Half 2015
13
US Natural Catastrophe Update
Source: NOAA
© 2015 Munich Re
Insured Loses Due to Convective Storms* January – June Only, 1980 - 2015
Insured losses (in 2014 values)**
**Losses adjusted to inflation based on country CPI
5 year Mean
*Convective storms include tornadoes, hail, and straight-line winds
Overall losses totaled US$ 7.0bn; Insured losses totaled US$ 5.1bn
14
US Natural Catastrophe Update
US$m
© 2015 Munich Re
Click icon to add picture
Update on El NiñoDr. Peter Höppe, Head of Geo Risks ResearchMunich Re
Source: NOAA
© 2015 Munich Re
1. ENSO (El Niño/Southern Oscillation): natural climate oscillation in tropical Pacific Ocean, which affects both ocean and atmosphere.
2. Anomaly of sea surface temperature in so called Niño3.4-Region (= Niño3.4-Index) is used to define ENSO-Phases:
ENSO (El Niño/Southern Oscillation)Definitions
Anomalies of sea surface temperatures inNiño3.4-region since 1950
Location of Niño 3.4-region
El Niño (Niño3.4-Index >0,5)
Neutral Phase (Niño3.4-Index <0,5 und >-0,5)
La Niña (Niñno3.4-Index <-0,5)
16Source: Climate Prediction Center/NOAA
Update on El Niño
© 2015 Munich Re
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; hascontributed to the record heat wave there.
Source: NOAA/CPC
Update on El Niño
17
© 2015 Munich Re
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
Update on El Niño
18
© 2015 Munich Re
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
Update on El Niño
19
Global characteristic changes in El Niño phases
© 2015 Munich Re
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!
Update on El Niño
20
© 2015 Munich Re
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 getaccess 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.
Update on El Niño
21
© 2015 Munich Re
Meteorological events(Tropical storm, extratropical storm, convective storm,local storm)
Hydrological events(Flood, mass movement)
Climatological events(Extreme temperature, drought, wildfire)
Geophysical events(Earthquake, tsunami, volcanic activity)
Source: Geo Risks Research, NatCatSERVICE – As at July 2015
Loss events
Selection ofCatastrophes
510Loss events
Source: Munich Re, NatCatSERVICE, 2015
Winter stormsElon and FelixEurope, 8–11 January
Winter Storm NiklasEurope, 30 March–1 April
EarthquakeNepal, China, India, Bangladesh25 April
Severe storm,tornadoChina, 1 June
Cyclone PamVanuatu,9–16 March
Winter stormAustralia, 19–24 April
Flash floodsChile,23–26 March
Winter stormUSA, Canada16–25 February
Severe stormsUSA, 18–21 April
Severe stormsUSA, 7–10 April
Avalanche, winter damageAfghanistan,February–March
Cyclone MarciaAustralia,18–20 February
HeatwaveIndia, PakistanMay–June
23
Global Natural Catastrophe Update
Loss events worldwide Jan – June 2015Geographical overview
© 2015 Munich Re
Meteorological events(Tropical storm, extratropical storm, convective storm, local storm)
Hydrological events(Flood, mass movement)
Climatological events(Extreme temperature, drought, forest fire)
Geophysical events(Earthquake, tsunami,
volcanic activity)
Loss events worldwide 1980 – 2015Number of events (January – June only)
Number
Global Natural Catastrophe Update
24Source: Munich Re, NatCatSERVICE – As at July 2015
© 2015 Munich Re
Loss events worldwide 1980 – 2015Overall and insured losses (January – June only)
Overall losses (in 2015 values)*
Insured losses (in 2015 values)*
US$ bn
*Losses adjusted to inflation based on country CPI
Global Natural Catastrophe Update
25Source: Munich Re, NatCatSERVICE – As at July 2015
© 2015 Munich Re
2015(Jan – June)
2014(Jan – June)
Average of the last 10 years2005-2014
(Jan – June)
Average of the last 30 years1985-2014
(Jan – June)
Top Year 1985 -2014 (Jan – June)
Number of events 510 520 440 330 620(2012)
Overall losses in US$ m (original values)
35,000 60,000 95,000 64,000 302,000(2011, EQ Japan)
Insured losses in US$ m (original values)
12,000 23,000 27,000 15,000 82,000(2011, EQ Japan)
Fatalities 16,200 2,800 46,000 27,000 230,000(2010, EQ Haiti)
Loss events worldwide 2015 Overview and comparison with previous years
Global Natural Catastrophe Update
26
© 2015 Munich Re
Date Region Event Fatalities
Overall losses US$ m
Insured lossesUS$ m
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*
Global Natural Catastrophe Update
27
Loss events worldwide 2015 The five costliest natural catastrophes for the insurance industry
*Date based on information from PCS
© 2015 Munich Re
Year Event Region Insured lossUS$m (in original values)
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
Global Natural Catastrophe Update
28
Costliest natural catastrophes since 1980Ranked by insured losses
Market & Financial Impact of Catastrophe Losses: First Half 2015 Summary
Insurance Information InstituteJuly 14, 2015
Robert P. Hartwig, Ph.D., CPCU, President & EconomistInsurance 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!
30
Losses from Snow, Ice, Freezing and Related Causes Typical Cost Insurers
Between $1 Billion and $2 Billion Annually ($2.3B+ in 2014/15)
31
US Real GDP Growth*
* Estimates/Forecasts from Blue Chip Economic Indicators.Source: US Department of Commerce, Blue Economic Indicators 7/15; Insurance Information Institute.
2.7%
1.8%
-1.8
%1.
3%-3
.7%
-5.3
%-0
.3%
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%
3.5%
-2.1
%4.
6% 5.0%
2.2%
-0.2
%2.
9% 3.2%
3.0%
2.7%
2.8%
2.7%
2.6%
-8.9%
4.5%
1.4%
4.1%
1.1% 1.
8% 2.5% 3.
6%3.
1%
-9%
-7%
-5%
-3%
-1%
1%
3%
5%
7%
2
00
0
2
00
1
2
00
2
2
00
3
2
00
4
2
00
5
2
00
6
2
00
7
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
Demand for Insurance Should Increase in 2015 as GDP Growth Accelerates Modestly and Gradually Benefits the Economy Broadly
Real GDP Growth (%)
Great Recession Dec. 2007- June 2009
The Q4:2008 decline was the steepest since the Q1:1982 drop of 6.8%
Q1 2014 GDP data were hit hard by that year’s “Polar Vortex”
and harsh winter
Q1 2015 GDP data were again hit hard
by harsh winter weather
32
Inflation Adjusted U.S. Catastrophe Losses by Cause of Loss, 1995–20141
0.1%
1.5%5.4%
0.1%
6.2%
6.8%
39.2%
40.7%
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 losses4. Includes wildland fires5. 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.
Hurricanes & Tropical Storms, $161.2
Fires (4), $6.0
Events Involving Tornadoes (2), $154.9
Winter Storms, $26.9
Terrorism, $24.5
Geological Events, $0.5
Wind/Hail/Flood (3), $21.4
Other (5), $0.2
Wind losses are by far cause the most catastrophe losses,
even if hurricanes/TS are excluded.
Tornado share of CAT losses is
rising
Insured cat losses from 1995-2014
totaled $395.6B, an average of $19.8B per year or $1.65B
per month
Winter storm losses were much above average in 2014/15 are
will push this share up
33
Top 16 Most Costly Disastersin U.S. History—Katrina Still Ranks #1
(Insured Losses, 2014 Dollars, $ Billions)
$8.1 $9.0 $9.4 $11.4$13.8
$19.3$24.6 $25.3$26.4
$50.2
$7.7$7.3$6.9$5.8$5.7$4.6
$0
$10
$20
$30
$40
$50
$60
Irene (2011) Jeanne(2004)
Frances(2004)
Rita (2005)
Tornadoes/T-Storms
(2011)
Tornadoes/T-Storms
(2011)
Hugo (1989)
Ivan (2004)
Charley(2004)
Wilma(2005)
Ike (2008)
Sandy*(2012)
Northridge(1994)
9/11 Attack(2001)
Andrew(1992)
Katrina(2005)
Storm Sandy in 2012 was the last mega-CAT
to hit the US
Includes Tuscaloosa, AL, tornado
Includes Joplin, MO,
tornado
12 of the 16 Most Expensive Events
in US History Have Occurred
Since 2004
Sources: PCS; Insurance Information Institute inflation adjustments to 2014 dollars using the CPI.
34
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
1Asked of those who have home insurance.
Source: Insurance Information Institute Annual Pulse Survey.
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.
24%
56%
19%
Don’t know Yes
No
I.I.I. Poll: Flooding from Hurricanes
South Northeast Midwest West Total U.S.0%
10%
20%
30%
40%34%
30%
14% 14%
24%
35
Q. Does your homeowners policy cover damage from flooding during a hurricane?1
Respondents answering “yes”.
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.
2015 Is Likely to Be One of the Strongest Years
in the Post-Recession Era(2013 Was Best)
36
P/C Insurance Industry:Financial Update
P/C Industry Net Income After Taxes1991–2015:Q1
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%
•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
$1
4,1
78
$5
,84
0 $1
9,3
16
$1
0,8
70
$2
0,5
98
$2
4,4
04
$3
6,8
19
$3
0,7
73
$2
1,8
65
$3
,04
6
$3
0,0
29
$6
2,4
96
$3
,04
3
$3
5,2
04
$1
9,4
56 $3
3,5
22
$6
3,7
84
$5
5,5
01
$1
8,1
00
$3
8,5
01
$2
0,5
59
$4
4,1
55
$6
5,7
77
-$6,970
$2
8,6
72
-$10,000
$0
$10,000
$20,000
$30,000
$40,000
$50,000
$60,000
$70,000
$80,000
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:Q
1
Net income fell modestly (-12.5%)
in 2014 vs. 2013
$ Millions
Net income was up
sharply in Q1, lower cats were one
factor
37
38
ROE: Property/Casualty Insurance by Major Event, 1987–2015:Q1
* Excludes Mortgage & Financial Guarantee in 2008 – 2014. Sources: ISO; Insurance Information Institute.
-5%
0%
5%
10%
15%
20%
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**
P/C Profitability Is Subject to Cyclicality and Ordinary
Volatility, Typically Due to CAT Activity
Hugo
AndrewNorthridge
Lowest CAT Losses in 15 Years
Sept. 11
Katrina, Rita, Wilma
4 Hurricanes
Financial Crisis*
(Percent)
Record Tornado Losses
Sandy
Low CATs
Somewhat higher CAT
activity in 2014 had a modest
negative impact on ROE
2015 similar to 2013-14
A 100 Combined Ratio Isn’t What ItOnce Was: Investment Impact on ROEs
Combined Ratio / ROE
* 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.
97.5
100.6 100.1 100.8
92.7
101.299.5
101.0
96.7 97.296.0
102.4
106.5
95.7
14.3%
15.9%
12.7%
10.9%
7.4% 7.9%
4.7%6.2%
10.5%
8.2%9.6%
8.8%
4.3%
9.8%
80
85
90
95
100
105
110
1978 1979 2003 2005 2006 2007 2008 2009 2010 2011 2012 2013 2014 2015:Q10%
3%
6%
9%
12%
15%
18%
Combined Ratio ROE*
Combined Ratios Must Be Lower in Today’s DepressedInvestment Environment to Generate Risk Appropriate ROEs
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
Lower CATs (relative to 2011/12) helped
ROEs in 2013/14/15
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
Policyholder Surplus, 2006:Q4–2015:Q1E
Sources: ISO, A.M .Best; I.I.I. estimate for Q1:2015
($ Billions)$4
87.1
$496
.6
$512
.8
$521
.8
$478
.5
$455
.6
$437
.1 $463
.0 $490
.8 $511
.5 $540
.7
$530
.5
$544
.8
$559
.2
$559
.1
$538
.6
$550
.3
$567
.8
$583
.5
$586
.9 $607
.7
$614
.0
$624
.4 $653
.4
$671
.6
$673
.9
$674
.7
$671
.0
$662
.0
$570
.7
$566
.5
$505
.0
$515
.6
$517
.9
$400
$450
$500
$550
$600
$650
$700
06:Q
4
07:Q
1
07:Q
2
07:Q
3
07:Q
4
08:Q
1
08:Q
2
08:Q
3
08:Q
4
09:Q
1
09:Q
2
09:Q
3
09:Q
4
10:Q
1
10:Q
2
10:Q
3
10:Q
4
11:Q
1
11:Q
2
11:Q
3
11:Q
4
12:Q
1
12:Q
2
12:Q
3
12:Q
4
13:Q
1
13:Q
2
13:Q
3
13:Q
4
14:Q
1
14:Q
2
14:Q
3
14:Q
4
15:Q
1E
2007:Q3Pre-Crisis Peak
Surplus as of 3/31/15 stood at a near-record high of $671B
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.
The industry now has $1 of surplus for every $0.73 of NPW,close to the strongest claims-paying status in its history.
Drop due to near-record 2011 CAT losses
The P/C insurance industry entered
2015 (and the 2015 hurricane season on
June 1)in very strong
financial condition.
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
$38.9$37.1 $36.7
$38.7
$54.6
$51.2
$47.1 $47.6$49.2
$48.0 $47.3$46.2 $46.7
$39.6
$49.5
$52.3
$30
$40
$50
$60
00 01 02 03 04 05 06 07 08 09 10 11 12 13 14 15E
Due to persistently low interest rates,investment income fell in 2012, 2013 and 2014. A small increase in
2015 is possible as interest rates slowly increase.
1 Investment gains consist primarily of interest and stock dividends. *2015 figure is estimated based on annualized data through Q1.Sources: ISO; Insurance Information Institute.
($ Billions) Investment earnings are still below their 2007 pre-crisis peak
43
Book Yield on Property/Casualty Insurance Invested Assets, 2007–2015*
4.38
4.17
4.023.87
3.63 3.643.74
3.82
3.44
3.0
3.2
3.4
3.6
3.8
4.0
4.2
4.4
4.6
07 08 09 10 11 12 13 14 15*
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
(Percent)
Book yield in 2015 is down 74 BP from pre-
crisis levels
44
UNDERWRITING
Underwriting Results in 2015 (and 2013-14) Were Helped by
Generally Modest Catastrophe Losses
Welcome Respites from 2011/2012
45
46
P/C Insurance Industry Combined Ratio, 2001–2015:H1*
* 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.
95.7
99.3100.8
106.3
102.4
96.7 97.2 97.0
101.0
92.6
100.898.4
100.1
107.5
115.8
90
100
110
120
01 02 03 04 05 06 07 08 09 10 11 12 13 14 15:H1
As Recently as 2001, Insurers Paid Out Nearly $1.16 for
Every $1 in Earned Premiums Relatively
Low CAT Losses, Reserve Releases
Heavy Use of Reinsurance Lowered Net
Losses
Relatively Low CAT Losses, Reserve Releases
Higher CAT Losses,
Shrinking Reserve
Releases, Toll of Soft Market
Cyclical Deterioration
Sandy Impacts
Lower CAT
Losses
Best Combined
Ratio Since 1949 (87.6)
Avg. CAT Losses,
More Reserve Releases
Modest CATs
Somewhat higher CAT
Losses
Underwriting Gain (Loss)All Lines Combined, 1975–2015*
Note: Includes mortgage and financial guaranty insurers in all years. Sources: A.M. Best, ISO, Insurance Information Institute.
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.
-$60
-$50
-$40
-$30
-$20
-$10
$0
$10
$20
$30
75 76 77 78 79 80 81 82 83 84 85 86 87 88 89 90 91 92 93 94 95 96 97 98 99 00 01 02 03 04 05 06 07 08 09 10 11 12 13 1415
E
($ Billions)
Underwriting profit in 2014 estimated at
$14B
2014 underwriting profit totaled
$12.3B
47
Severe Weather Reports: Jan. 1 – July 13, 2015
Source: NOAA Storm Prediction Center; http://www.spc.noaa.gov/climo/online/monthly/2015_annual_summary.html
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
Severe weather reports are concentrated east of
the Rockies
48
Number of Federal Major Disaster Declarations, 1953-2015*
13 1
7 18
16
16
7 71
21
22
22
0 25
25
11
11
19
29
17
17
48
46
46
38
30
22 2
54
22
31
52
42
13
42
7 28
23
11
31
38
45
32 3
63
27
54
46
55
04
54
5 49
56
69
48 5
26
37
55
98
19
94
75
55
42
3
43
0
20
40
60
80
100
120
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
*
*Through July 12, 2015.Source: Federal Emergency Management Administration; http://www.fema.gov/disasters; Insurance Information Institute.
The Number of Federal Disaster Declarations Is Rising and Set New Records in 2010 and 2011 Before Dropping in 2012-2014
The number of federal disaster
declarations set a new record in 2011, with 99, shattering 2010’s record 81
declarations.
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.
23 federal disasters have declared so far
in 2015*
49
50
Combined Ratio Points Associated withCatastrophe Losses: 1960 – 2015E*
*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.
0.4
1.2
0.4 0.
8 1.3
0.3 0.4 0.
71.
51.
00.
40.
4 0.7
1.8
1.1
0.6
1.4 2.
01.
3 2.0
0.5
0.5 0.7
3.0
1.2
2.1
8.8
2.3
5.9
3.3
2.8
1.0
3.6
2.9
1.6
5.4
1.6
3.3
3.3
8.1
2.7
1.6
5.0
2.6
4.5
9.1
7.5
3.2 3.
6 3.7
3.6
0.9
0.1
1.1
1.1
0.8
0
1
2
3
4
5
6
7
8
9
10
1960
1962
1964
1966
1968
1970
1972
1974
1976
1978
1980
1982
1984
1986
1988
1990
1992
1994
1996
1998
2000
2002
2004
2006
2008
2010
2012
2014
The Catastrophe Loss Component of Private Insurer Losses Has Increased Sharply in Recent Decades
Avg. CAT Loss Component of the Combined Ratio
by Decade
1960s: 1.04 1970s: 0.85 1980s: 1.31 1990s: 3.39 2000s: 3.52 2010s: 5.6E*
Combined Ratio Points
Catastrophe losses as a share of all losses reached
a record high in 2011
Catastrophe losses as a share of all losses have
been down substantially since
2013
52
-5%
0%
5%
10%
15%
20%
25%
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 1415
E
Net Premium Growth: Annual Change, 1971—2015E
(Percent)
1975-78 1984-87 2000-03
Shaded areas denote “hard market” periodsSources: A.M. Best (historical and forecast), ISO, Insurance Information Institute.
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.
2015E: 3.9%
2014: 4.1%
2013: 4.4%
2012: +4.3%
Post-Andrew
spike
Post-Katrina spike
www.iii.org
Thank you for your timeand your attention!
Twitter: twitter.com/bob_hartwig
Insurance Information Institute Online:
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Follow-up InformationSharon Cooper – Media SpokespersonMunich Reinsurance America, Inc.
Source: FEMA
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0%
50%
100%
150%
200%
250%
300%
350%
400%
450%
500%
1980 1982 1984 1986 1988 1990 1992 1994 1996 1998 2000 2002 2004 2006 2008 2010
Annual statistics Long-term statistics Information on significant natural disasters Focus analyses NatCatSERVICE methodology, info brochure Publication Topics Geo
NatCatSERVICE Downloadcenter
200
400
600
800
1 000
1 200
1980 1982 1984 1986 1988 1990 1992 1994 1996 1998 2000 2002 2004 2006 2008 2010
MR NatCatSERVICEThe world‘s largest database on natural catastrophes
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© 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.