Property insurers were liable for worldwide claims of Dh55 billion in 2006, less than a fifth of 2005's total of Dh305bn, according to a report from industry heavyweight Swiss Re.
The respite follows a rela tively quiet year for natural disasters, which claimed 30,000 lives in 2006, compared to 97,000 the year before.
This allowed insurance companies to replenish their risk capital, which was depleted by record payments in 2004 and 2005.
Hurricane Katrina, which struck New Orleans in August 2005, wiped out a third of United States insurance companies' capital.
Last year resulted in the third-lowest insured losses in the past 20 years, after 1988 and 1997.
A Swiss Re report states: "As the typhoons and earthquakes in 2006 mainly hit newly industrialising countries where insured values are relatively low, the directly attributable financial losses were quite mild at around $40bn [Dh146.9bn].
Of these, only $15bn [Dh55.1bn] was actually covered by insurance." In 2006, Swiss Re recorded nearly 140 natural catastrophes and more than 200 man-made disasters across the globe.
Windstorms and floods claimed 11,500 lives, while the biggest single disaster was the Indonesian Bantul earthquake, which killed almost 6,000 people.
"In the long term, we are seeing an increase in the inten sity and frequency of natural disasters and so insurance companies are redesigning their products accordingly," said Clarence Wong, head of Swiss Re's economic research in Asia.
He said companies had previously failed to fully price the accumulation of risk, such as the lack of disaster relief contributing to larger losses, as was the case with Hurricane Katrina.
Last year, insurance companies began to revise their catastrophe modelling to more accurately predict the probability of certain events happening.
Wong added: "Say an insurance company insured a particular building and a disaster struck the surrounding area, the company could also have insured other nearby buildings, which is an accumulation of risk that the industry had previously failed to take into account.
"Similarly, the factory may not only be insured in terms of property, but business interruption as well, yet the two were not correlated before," said Wong.
"Consequently the loss potential was understated." Insurance companies have faced criticism that they have long been investing in industries - such as fossil fuels - that could exacerbate natural disasters and therefore increase their losses in the long term.
But Wong said insurers are now targeting investments in environmentally friendly businesses.
By Matt Smith
© Emirates Today 2007
