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Extreme weather causes $125 billion insurance bill: Munich Re

Tuesday, 7 Jan 2014 | 6:23 AM ET
Cargo ship swept ashore by Super Typhoon Haiyan
Ted Aljibe | AFP | Getty Images
Cargo ship swept ashore by Super Typhoon Haiyan

Natural disasters caused more than $125 billion of damage in 2013, with Typhoon Haiyan causing the greatest amount of damage and casualties, according to a report from European reinsurer Munich Re.

The Philippines typhoon was last year's deadliest event, killing more than 6,000 people and causing more than $10 billion worth of damage, equivalent to around 5 percent of the Philippines annual economic output, the group said in its annual review of natural catastrophes.

Worryingly for the region, Ludger Arnoldussen, a member of Munich Re's management board whose responsibilities include the Asian markets, said that the region could see more typhoon activity.

(Read more: Will typhoon Haiyan derail Philippines' economy?)

"The destructive power of typhoons threatens coastal regions, islands and also inland regions throughout Southeast Asia. Based on a natural cycle, our analyses predict the beginning of a phase with higher typhoon activity for the coming years."

Along with other reinsurers, Munich Re gives insurance firms a way to spread their policy risk by assuming the liability in return for a slice of the premium income.

Munich Re expects more natural disasters
CNBC's Annette Weisbach reports that Munich Re is expecting more natural catastrophe's in the future, especially tropical storms.

However, the costliest natural catastrophe of the year in terms of overall economic losses, however, was the flooding in central Europe at the beginning of June, where overall losses totaled $15.2 billion and insured losses came to $3 billion. Freak hailstorms which damaged cars, buildings and roofs in July and August in Germany caused the highest insured losses, meanwhile, with overall losses of $5.2 billion of which $4.1 billion was insured.

In its annual review of natural catastrophes, the German reinsurer said that 20,000 lives had been lost in the 880 natural disasters recorded last year yet "globally, losses from natural catastrophes in 2013 were somewhat more moderate," Munich Re noted.

(Read more: 'A real mess': Blizzard-like conditions coming across the Northeast)

Direct overall losses caused by global disasters amounted to around $125 billion and insured losses of around $31 billion, but although weather-related disasters had caused "exceptionally high losses" last year, these were below the average of the past ten years of $184 billion and $56 billion respectively.

The report showed a contrasting picture between developed and emerging market economies in terms of planning for disasters and the insured losses caused by them, the group said.

"Several of the events of 2013 illustrated how well warnings and loss minimisation measures can restrict the impact of natural catastrophes. In the case of the most recent winter storms in Europe, for example, the losses remained comparatively low," Torsten Jeworrek, a Munich Re Board member responsible for global reinsurance business said.

(Read more: What is a polar vortex? (And when is it going away?)

In the Philippines, however, "owing to the very low insurance penetration, the insured loss will probably only be in the mid three-digit million range," Munich Re stated.

"Events like those in the Philippines show the urgent need for more to be done in developing and emerging countries to protect people better. This includes stabler buildings and protection facilities, and insurance programmes – also with state backing – to provide those affected with financial assistance after a disaster."

- By CNBC's Holly Ellyatt, follow her onTwitter @HollyEllyatt

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