Record disaster insurance costs in 2011

The devastating earthquakes in Japan and New Zealand made 2011 the costliest year yet for the insurance industry in terms of natural disaster losses, a leading reinsurance company said Wednesday.

Munich Re AG said in an annual report that insured losses last year totaled $105 billion -- exceeding the previous record of $101 billion set in 2005, when losses were swollen by claims from Hurricane Katrina in New Orleans.

The company said the total economic cost last year from natural disasters -- including uninsured losses -- totaled about $380 billion. That sum was far above the 2005 record of $220 billion.

Japan's earthquake and tsunami in March caused overall losses of $210 billion and insured losses of between $35 billion and $40 billion, Munich Re said. The accounting didn't include the consequences of the subsequent meltdowns at the Fukushima Dai-ichi nuclear plant, which resulted in the evacuation of a wide swath of land.

The second most costly disaster for insurers, at $13 billion, was the February quake that devastated much of the New Zealand city of Christchurch.

Munich Re said last year's sequence of natural disasters was very rare, and that 2011 brought catastrophes expected only once every 1,000 years or more. Normally, weather-related events are the chief cause of losses.

"Even if it seems hard to believe given recent events, the probability of earthquakes has not increased," said Peter Hoeppe, the head of Munich Re's risk research unit.

Severe storms and tornadoes in the United States in late April cost insurers $7.3 billion and led to overall damage worth $15 billion. Hurricane Irene, which hit the Caribbean and United States in late August, caused insured losses of $7 billion and total losses of $15 billion.

Still, Munich Re said losses from North Atlantic hurricanes were "moderate" in 2011, with only three major named storms making landfall in the United States.

Reinsurers offer backup policies to insurance companies. Reinsurance helps spread risk so that the system can handle large losses from natural disasters.

Sometimes insurance premiums actually rise after large disasters because insurers' capacity to offer policies is reduced. But in 2011 many observers say reinsurers' pricing strength didn't increase because the companies still had plenty of excess capital. With Reuters