How do losses recovered from foreign insurance companies following natural or man-made disasters affect foreign transactions, the current account balance, and net lending or net borrowing?

Under a new treatment adopted in 2009, foreign transactions associated with losses recovered from insurance companies following certain natural or man-made disasters are included in the capital account, which is a component of net lending and borrowing in the NIPAs. To the extent that losses are insured (or reinsured) by foreign insurance companies, capital account transactions (net) will reflect increased inflows for the period in which the disaster occurs. As a result, net lending or net borrowing in the NIPAs changes in a positive direction. Losses recovered from major disasters no longer directly affect the current account balance.

For more information on how BEA calculates insurance services click here.

For more information on the treatment of disasters in the international accounts click here.