1.3.8.4 Economic and insurance losses

Economic losses attributed to natural disasters have increased from US$75.5 billion in the 1960s to US$659.9 billion in the 1990s (a compound annual growth rate of 8%) (United Nations Development Programme, 2004). Private-sector data on insurance costs also show rising insured losses over a similar period (Munich Re Group, 2005; Swiss Reinsurance Company, 2005). The dominant signal is of significant increase in the values of exposure (Pielke and Hoppe, 2006).

However, as has been widely acknowledged, failing to adjust for time-variant economic factors yields loss amounts that are not directly comparable and a pronounced upward trend through time for purely economic reasons. A previous normalisation of losses, undertaken for U.S. hurricanes by Pielke and Landsea (1998) and U.S. floods (Pielke et al., 2002) included normalising the economic losses for changes in wealth and population so as to express losses in constant dollars. These previous national U.S. assessments, as well as those for normalised Cuban hurricane losses (Pielke et al., 2003), did not show any significant upward trend in losses over time, but this was before the remarkable hurricane losses of 2004 and 2005.

A global catalogue of catastrophe losses was constructed (Muir Wood et al., 2006), normalised to account for changes that have resulted from variations in wealth and the number and value of properties located in the path of the catastrophes, using the method of Landsea et al. (1999). The global survey was considered largely comprehensive from 1970 to 2005 for countries and regions (Australia, Canada, Europe, Japan, South Korea, the USA, Caribbean, Central America, China, India and the Philippines) that had centralised catastrophe loss information and included a broad range of peril types: tropical cyclone, extra-tropical cyclone, thunderstorm, hailstorm, wildfire and flood, and that spanned high- and low-latitude areas.

Once the data were normalised, a small statistically significant trend was found for an increase in annual catastrophe loss since 1970 of 2% per year (see Supplementary Material Figure SM1.1). However, for a number of regions, such as Australia and India, normalised losses show a statistically significant reduction since 1970. The significance of the upward trend is influenced by the losses in the USA and the Caribbean in 2004 and 2005 and is arguably biased by the relative wealth of the USA, particularly relative to India.