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The Actuary The magazine of the Institute & Faculty of Actuaries

General Insurance: Large Losses

Collision between container ship Cosco Busan and San Francisco Bay Bridge – 7 November 2007 (see March website entry). The ship-owners and their liability insurers (Steamship Mutual P&I Club) have sued the US state and federal authorities which licensed the pilot under whose pilotage the ship hit the bridge, on the grounds that (with the knowledge of the authorities) he was taking medication which was inappropriate in this job. The pilotage contract signed on behalf of the ship-owners exempts the pilot himself from legal liability. The claims involved in the case amount to around US$60m.

Earthquake in Sichuan province, south-western China – 12 May.
Later estimates suggest that a higher proportion of the losses from this event may be insured than the 5% reported last month – a figure of 15% has now been mentioned, although there remains much uncertainty. Munich Re have estimated that overall insured losses may exceed US$1.5bn. Most of this is still likely to be retained within the local market. However, a much lower estimate has now been received (under a million) of the number of homes destroyed.

Tornadoes and hailstorms, Colorado – 22 May.
These, which are relatively unusual in Colarado, included a tornado a mile wide which hit Windsor, north of Denver, causing significant damage to at least 600 homes and many cars. One fatality was reported, and insured losses are estimated at US$147m.

Malfunction in Express-AM22 communications satellite – 22 May.
This was caused by a problem in the gyroscopic stabilisation system, resulting in excessive consumption of fuel and subsequent failure to operate. The satellite is insured under an orbit policy for US$107m, placed in London and led in the Lloyd’s market.

Fire at Universal Studios, California – 1 June.
This was believed to be caused by a construction worker using a blow-torch, and resulted in the destruction of various film sets and videotapes of TV and film shows (although not the originals). Property and business interruption claims have been made, but no estimate of the insured cost is to hand.

Malfunction in KazSat 1 satellite – 8 June.
This was caused by a problem with a computer system, which resulted in this first-ever Kazakhstani satellite disappearing from its orbit. There is a London orbit insurance policy for US$60m in place, but it is not yet known whether this will be a total loss, as experts are still trying to rectify the problem.

Floods in mid-west of US – mid to late June.
These were caused by the breaching of the banks of the River Mississippi and its tributaries the Cedar and Iowa, inundating large areas of Iowa, Illinois and Missouri. The insured losses are expected to include a significant contribution from crop insurance, as this area produces a large proportion of the nation’s corn and soya beans. However, a significant proportion of farmers are believed to have decided not to buy flood insurance, not expecting anything of this magnitude, whish is understood to be of a magnitude one would expect with a 500 year return period. Early loss estimates suggested a figure for economic losses of US$3bn in Iowa alone.

Typhoon Fengshen, Philippines – 20 June.
This caused the sinking of the Princess of Stars ferry in what is believed to be the worst ferry disaster for 20 years, with only 38 survivors from the estimated 800 crew and passengers on board. It is understood that there is a policy written by Oriental Assurance Company in place, which will pay US$7m for the hull and US$4500 for each lost passenger. In addition, the typhoon caused extensive damage on land, with heavy rain, severe flooding and many landslides. It is believed that the death toll on land could reach 600, but no insured loss details are available. The storm subsequently moderated considerably before it reached the coast of China, where no particularly severe consequences have been reported.