Because so few people and businesses in the areas affected by the December tidal waves were insured, the insurance industry is not expected to take much of a hit in terms of insurance payouts, according to a new report.
Nonlife premiums in Indonesia, the country hardest-hit, amount to just $8 per person. In Malaysia, nonlife per capita premiums amount to $87. In Sri Lanka, nonlife premiums amount to $7. By comparison, a total of $1,980 per capita was spent on nonlife insurance in the United States in 2003.
The estimates appear in a report issued Dec. 30, by the Insurance Information Institute.
Tidal waves washed ashore following the Dec. 26 earthquake, and affected about a dozen nations located around the Bay of Bengal in the Indian Ocean. More than 280,000 people were reported dead or missing, according to some estimates.
Insurance policies through which carriers will have to make payouts include standard fire policies, which cover fire, lightning and explosion only; extended coverage policies which cover standard fire policies but include earthquake, tsunami and volcanic eruptions; and "all risks" policies, which cover unforeseen, sudden and accidental physical losses.
Major carriers like AIG and big reinsurers like Munich Re have already said they expect their losses from the disaster to be minimal.
The tsunamis that rolled ashore capped an expensive year for the insurance industry.
Swiss Re estimates that there were about 330 natural and man-made catastrophes. The losses have claimed the lives of an estimated 300,000.
Losses attributable to these events are estimated at about $123 billion, of which $49 billion is covered by property insurance. Insured property losses last year were a record high.
In the United States, hurricanes hammered Florida. Loss modeling vendors have come up with differing estimates, according to data compiled by the reinsurance intermediary Carvill.
Risk Management Solutions Inc. estimates losses at between $16 billion and $28 billion. AIR Worldwide said losses would come to between $19 billion and $35 billion. EQE estimates losses at between $18 billion and $33 billion. And ISO Property Claim Services estimates the damage at $20.4 billion.
But weather is not the only culprit responsible for the staggering losses inflicted by a brutal hurricane season. Overdevelopment, rapid growth and the "increasing concentrations of assets" are also to blame. According to a report from Swiss Re: "The enormous losses of $19 billion have to be seen against the background of 70 percent population growth between 1980 and 2001."
Hurricane Ivan, which hit the United States last September, caused an estimated $11 billion in losses, according to Swiss Re, more than twice as much as the $5 billion in estimated losses from the Indian Ocean tsunami.
April 15, 2005
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