Allianz Risk Barometer 2018
Major risks in focus: Nat Cat

Uptick in activity begs the question: Is this a new “normal” of extreme weather? Allianz Risk Barometer respondents are concerned it is – and about the potential for larger losses.

Approximately, $330bn in overall losses from natural catastrophes. Around $135bn in insured losses¹. At least $90bn from the three category 4+ hurricanes – Harvey, Irma, and Maria (HIM) that wreaked havoc in September, making it the most active hurricane month on record² and 2017 one of the most costliest seasons on record. Over $2bn dollars in insured losses from an earthquake in Mexico, also during September. Nearly $10bn worth of wildfire insurance claims in California alone through October³. Wherever you look, it doesn’t take long to locate a startling statistic about natural catastrophe activity during 2017. And the numbers could get worse. Given the wide-ranging impact of HIM – from flood damage by Harvey in Houston to business interruption (BI) from record power outages in Puerto Rico caused by Maria – it may be some time before the final loss total is known.

Activity was not just confined to the Americas. Severe flooding events rocked Bangladesh, China, Sri Lanka, Peru and Zimbabwe. Killer mudslides devastated Columbia and Sierra Leone. Extreme wildfires tore across the Iberian peninsula and multi-seasonal drought conditions continued throughout the Mediterranean and parts of Africa and Australia, which was also hit hard by Cyclone Debbie in March. In the Philippines, Tropical Storm Tembin triggered floods and landslides on Christmas  Day. If businesses had become complacent following a number of relatively quiet catastrophe years – by insurance standards at least – 2017 provided a wake-up call, ensuring natural catastrophe risk rises up the Risk Barometer to 3rd position in 2018.

“Recent events have been a reminder of how significant the impact of natural catastrophes can be, both socially and economically,” says Ali Shahkarami, Head of Catastrophe Risk Research, AGCS. “As industries become leaner and more connected globally, it is becoming more and more clear that natural  catastrophes can trigger or contribute to many other risks, such as business interruption or loss of market share, for example. This has certainly influenced the sustained attention on natural catastrophes in the Risk Barometer.”

“There are more people and more development in harm’s way especially along the US coasts,” says Andrew Higgins, Technical Manager, Americas, Allianz Risk Consulting, AGCS. “In order to protect coastal communities, there needs to be ample zoning laws to prevent unbridled overdevelopment, along with less concrete and more green space to allow tropical rains to properly drain. For example, some areas of Houston received about half of the amount of rain from Hurricane Harvey compared with a recordsetting deluge in Nederland, Texas (154cm/60.6 inches)⁷ but experienced much worse flooding. The difference is overdevelopment.”

In order to keep up with rapidly-changing risk concentration, insurers such as AGCS are using a variety of new catastrophe management tools and insurance solutions to monitor storms and assess natural catastrophe damages from events such as those in 2017. These tools include drones – used outdoors to assess roof wind damages and inaccessible locations, but also indoors to assess water damage in large facilities – and satellite technology and 3D imagery, to locate risks more quickly and more precisely.

“Currently we have several initiatives ongoing that combine state-of-the-art data analytics tools and the geographic information system (GIS) with the latest technologies on satellite imagery, big data and machine learning to provide advanced solutions that will significantly aid critical decision-making,” explains Shahkarami. “For example, this would allow us to have aerial images of impacted regions and potentially assess damage level to facilities immediately after a wildfire event or estimate the extent of flooding or damage to the top of the roofs of buildings after a windstorm. We live in exciting times from a technological perspective and are eager to utilize every tool available to better serve our customers.”