Guy Carpenter Unveils Report on Indian Ocean Tsunami Event

March 14, 2005

Guy Carpenter & Company Inc. announced the publication of Tsunami: Indian Ocean Event and Investigation into Potential Global Risks, which details the damage caused by the Sumatra earthquake and subsequent tsunami in Asia and explores the global danger that the tsunami hazard poses.

While the 2004 tsunami was one of the worst natural disasters on record in terms of loss of life, overall insured and reinsured losses are expected to be relatively minimal since most of the destruction occurred in areas that were largely uninsured.

According to the report, total insured losses are expected to range from U.S.$2.5 billion to U.S.$4 billion, and life and health costs may reach U.S.$1 billion. Early forecasts indicate that reinsured losses will not be large.

The report also indicates that tsunamis are actually a widespread phenomenon, with over 1,100 recorded globally since 1900. The Pacific Ocean alone faced 828 tsunamis — over 200% more than every other region combined — for an average of nearly eight a year. The Atlantic Ocean, Indian Ocean and European seas each experienced about 60-65 events since 1900, or about 1.7 a year.

“Although the 2004 tsunami drew worldwide attention because of the massive devastation left in its wake, tsunamis are far more common than people think. As population density continues to increase in many of the world’s coastal areas, our understanding of the peril may help prepare better warning systems, limit loss of life and mitigate property damage,” said Ryan Ogaard, global practice leader of Guy Carpenter’s Instrat unit.

The report also provides information about the cause of the 9.0 magnitude Sumatra earthquake, the damage extent across Asia and east Africa and the economic and insured loss estimates for each affected country. The report analyzes the threat to countries near the Pacific, Atlantic and Indian oceans and examines historical tsunamis and their main causes, including earthquakes, landslides, volcanic activity, meteor impacts and man-made explosions.

Among the report’s major observations:

* The Pacific Ocean holds the most risk to life and property for this kind of peril, as this region has the highest frequency and greatest potential for destructive tsunami events.
* The Atlantic Ocean contains several areas that could trigger a large tsunami, however, it is probable that the frequency and magnitude of events would be less than in the Pacific Ocean.
* With three major events in the past 150 years, the Indian Ocean faces a high incidence of tsunamis, with potentially devastating effects.
* While plans are in place to extend the reach of the existing warning system to affected regions not yet covered, an effective network cannot prevent property destruction or limit insured losses in vulnerable areas.

Copies of the report, Tsunami: Indian Ocean Event and Investigation into Potential Global Risks, are available for download at www.guycarp.com.