Cyclone Daria, or the Burns' Day Storm
A year of severe storms and great expense for primary insurers and reinsurers, 1990 has gone down in history. Cyclone Daria began on 25 January, the birthday of Scottish poet Robert Burns, and so became known as the Burns' Day Storm. Storms Wiebke and Vivian followed later that same year.
A storm of new proportions
Even today, Cyclone Daria remains one of the most devastating and expensive storms the world has ever seen. In Northern and Central Europe, some 95 people died as a result of Daria and Swiss Re estimated the total cost of property damage to be around EUR 6 billion. The storm cost UK insurers in particular a considerable amount of money, with companies paying out almost GBP 3.37 billion. As the Daria travelled from Ireland to Denmark, around three million trees were felled, half a million households lost electricity and there were severe floods in the UK and western Germany in particular.
Strong winds caused devastation
The storm was preceded by a considerably warm winter. In Germany, for example, temperatures reached 20 degrees before Christmas. Daria started out as a cold front over the North Atlantic. On the morning of 25 January, the storm made landfall over Ireland and then moved east over Great Britain. Daria caused major damage along its path, mainly in the Netherlands, Belgium, France, Germany and Denmark. The strongest sustained winds recorded were between 110km/h and 120km/h, though strong gusts of up to 170km/h were reported – these gusts were responsible for the most extensive damage.
The next major storm is bound to come
The 1990 storm cluster brought several companies or entire markets to the limits of their financial capabilities. This underlines how important it is to prepare for these peak events. Experience has shown that several areas are critical:
- Unexpected aggregation can take place via the specific event definition in a reinsurance contract (e.g. a 72-hour clause).
- Reinsurance products such as CatXL covers with one or more reinstatements, drop-down mechanisms (e.g. lower retention for second events), or Aggregate XL covers can be affected by more than one strong storm hitting during one and the same contract period.
- Clustering generates large losses and therefore has a substantial impact on solvency considerations. Nowadays, regulators request that insurance companies provide their own view of how storm clustering affects their portfolio.
- Claims inflation can lead to substantial loss amplification.
- Processes become overwhelmed with the vast number of claims.
We need to prepare for these high-severity events now. Swiss Re is here to help you in this endeavour. Together we make sure you and your clients have the resilience to withstand the next severe winterstorms.