Damage from natural disasters so far this year is down, a report said Tuesday, pushing premium prices for catastrophic insurance lower.

For Omaha-based Berkshire Hathaway Inc. and other property insurers, fewer disasters and fewer claims mean smaller insurance payouts and bigger profits — good news.

But for Berkshire, lower insurance prices also mean less revenue coming in and a pullback from the property insurance business. That’s because Berkshire’s insurance operators turn down business if the premiums go too low.

The new report by Munich Re, which competes with Berkshire in the business of taking over risks for other insurers, said the first six months’ natural disasters worldwide — storms, floods, earthquakes, heat waves and wildfires — caused 16,200 fatalities and $35 billion in losses, $12 billion of that insured.

That’s down from an average of 46,000 fatalities, $95 billion in damage and $27 billion covered by insurance in the first six months of the previous 10 years.

The number of catastrophes, however, is up — 510 through the first six months, compared with a first-half average of 440 between 2005 and 2014.

The worst U.S. damage this year was from California’s extended drought, flash flooding in Texas and Oklahoma and heavy winter snows and cold weather in New England, the report said.

In the United States alone, disasters caused $8.2 billion in damage in the first half of this year, down from a six-month average of $11.2 billion.

Berkshire Hathaway, the conglomerate headed by CEO Warren Buffett, said in its first-quarter earnings report that the premium dollars it received were down 2 percent from the same period of 2014.

“Our underwriters are instructed to reject inadequately priced risks,” Berkshire said, noting that prices “in our view, have been generally inadequate.”

The prices also have been lower in recent years because more companies are competing in the reinsurance business. The Wall Street Journal reported recently that pension funds, seeking higher returns on their money, are new competitors in the reinsurance sector.

The low-claim situation continued through the first half of the year, according to Tuesday’s report from Munich Re and the Insurance Information Institute. Companies are seeking to expand their insurance operations by reducing prices to gain more business.

Property insurers are on track to bring in an estimated $14 billion more than they pay out in claims this year, the report said. That would be the first time in more than 40 years that the companies have made underwriting profits three years in a row, and only the eighth time since 1975, Munich Re said.

Most years, insurance companies make up for underwriting losses by investing the money that’s waiting to pay claims.

Munich estimated that companies would earn $46.7 billion on investments in 2015, still less than the peak of $54.6 billion in 2007. Low interest rates are generally responsible for the lower return on investments.

Nevertheless, the report said, property-casualty insurers in the United States and elsewhere in the world, as a group, are writing plenty of insurance policies and have strong finances available to pay for the catastrophic damage.

The report also warned that fewer Americans — even those living in coastal areas — are buying flood insurance because government subsidies are ending and coverage is more expensive.

That means coastal property will be subject to an uninsured financial disaster when another mega-hurricane hits, said Bob Hartwig, an economist and president of the Insurance Information Institute in New York City.

In a survey of U.S. homeowners, Hartwig said, 24 percent said they have flood insurance, 56 percent said they don’t and 19 percent didn’t know. The total is less than 100 percent because survey figures were rounded.

Hartwig said the global property insurance industry has a record or near-record capacity to pay insurance claims, having built up reserves during a period with relatively few catastrophes. Barring a “mega-catastrophe” this year, that should continue, he said.

At the same time, many of the fatalities and much of the damage each year happen in developing countries where insurance is not available, said Peter Hoppe, head of Munich Re’s corporate climate center.

He said the international group known as the G-7 (Canada, France, Germany, Italy, Japan, the United Kingdom and the United States) is starting a program to insure 400 million people in underdeveloped countries against weather-related damage. The German government has pledged $165 million for a pilot project.

Contact the writer:

402-444-1080, steve.jordon@owh.com

Get the latest development, jobs and retail news, delivered straight to your inbox every day.

* I understand and agree that registration on or use of this site constitutes agreement to its user agreement and privacy policy.

Commenting is limited to Omaha World-Herald subscribers. To sign up, click here.

If you're already a subscriber and need to activate your access or log in, click here.

Load comments

You must be a full digital subscriber to read this article You must be a digital subscriber to view this article.