But the trend is also of growing concern for governments of underinsured economies.
The earthquake that hit Tohoku Japan on March 11, 2011, caused an economic loss in the region of $235 billion (R2.6 trillion), according to data from Munich Re and the World Bank. That equated to 4% of Japan’s GDP.
Insured losses for the event, on the other hand, amounted to $35 billion or 0.6% of GDP.
According to S&P, natural disasters can lead “to a short-term increase in fiscal deficits as tax revenues fall, as well as an increase in trade deficits as exports decrease while imports rise”.
The agency notes in its Global Reinsurance Highlights 2014: “Our research suggests that, over the long term, climate change and extreme weather events could lead to sovereign rating changes, and could contribute to a divergence in ratings between sovereigns.”
Closer to home, short-term insurers had to fork out in excess of R1.6 billion in the wake of the hailstorm that hit Gauteng on November 27 last year. In the past two years, floods and fires have caused losses running into the hundreds of millions of rand for the industry.
Much of the damage caused by extreme weather events in South Africa is wrought on uninsured areas of the land, displacing entire communities.
Dr Cornelius Ruiters, executive director of the built environment at the Council for Scientific and Industrial Research (CSIR), says towns and homes downstream of the Vaal Dam are particularly at risk of flooding. The Water Act of 1998 actually prohibits development within a one-in-100 year flood line and some of the properties along the Vaal River should not even exist for this reason, Ruiters said.
Ruiters believes insurance companies should refuse to insure such properties.
In an effort to better understand natural catastrophe risk and disaster recovery, the University of Pretoria’s Centre for Natural Hazards has been reconceptualised with MMI Holdings, Aon Benfield and Munich Re. The centre has conducted research into earthquakes and the effects of acid mine water around Gauteng.
The centre will be doing hail modelling from next year.