The oldest market of insurers in the world has issued a caution to the globe.
Lloyd’s of London, the oldest coverage market worldwide, has issued a warning to the insurance industry, cautioning it that if a natural disaster should strike in emerging economies, the cost of rebuilding could be enormous.
It has included over a dozen emerging economies in its warning against tremendous rebuilding bills.
In fact, it pointed out that there is currently a global insurance industry deficit worth £104 million ($168 million), and that this is now affecting a minimum of 17 different countries. This message of caution follows a broad range of natural disasters in 2011, which led to £3.6 trillion in damage.
Last year, the insurance industry had to face the earthquake and tsunami in Japan and many other massive disasters.
There was also a typhoon in the Philippines, earthquakes in New Zealand, and massive flooding in Thailand, which all generated significant costs to the insurance industry. This was on top of the catastrophic string of tornadoes that struck the United States, which brought in another $35 billion (£22 billion) in damage.
The insurance industry faced record losses last year. In fact, the 324 year old Lloyd’s of London saw a loss of £516 million, which was the first time the market lost money since the 2001 terrorist attacks. In that year, $107 billion (£66 billion) were paid out in claims, making it the priciest year that has ever been faced by insurers.
Now, superstorm Sandy has struck the United States and has generated costs of up to $50 billion (£31 billion), and there are still outstanding costs being faced by the claims from the Costa Concordia cruise ship that ran aground off Italy’s coast.
The data from Lloyd’s was gleaned from the analysis performed by the Centre for Economic and Business Research (CEBR). Their insurance industry statistics have shown that there has been a £540 billion increase in the cost of natural disasters. It has also cautioned that in the fastest growing emerging markets, there is a coverage gap that will have a massive and ongoing impact on the ability of governments and businesses to recover from these catastrophes that occur each year.