A trend of higher than average natural catastrophe losses has continued for the first half of 2023, according to global reinsurers
By acting editor Yiannis Kotoulas
News coverage of seemingly constant apocalyptic weather conditions increasing around the globe has become somewhat of a trend in recent years.
The global cost of severe weather conditions is also on the rise, with insurers and reinsurers currently expected to pick up the slack.
In Swiss Re’s latest annual Sigma report, published earlier in the summer (10 July 2023), the global reinsurer stated that insured losses from natural catastrophes grew by an average of between 5% to 7% year-on-year between 1992 and 2022.
The reinsurance firm said the majority of this increase in insured losses was caused by increased rates of urbanisation and rising populations in areas exposed to natural catastrophes, with factors like social and economic inflation piling on increased upward pressure.
In this report, Swiss Re said: “Climate change effects likely play a role also, but are not a primary diver increasing losses – at least not yet.”
So while the reinsurers may not be able to link their increased losses to climate change directly, it is undeniable reality that the costs of insuring against natural catastrophes are increasing.
Earlier this week (9 August 2023) Swiss Re released its H1 2023 results, revealing that it has suffered global insured losses from natural catastrophes worth $50bn (£39bn) in first half of 2023. This represents a the second highest total figure for these losses since 2011 and a slight rise from H1 2022, when the figure sat at $48bn (£37.5bn).
Martin Bertogg, head of catastrophe perils at Swiss Re, explained: “With severe thunderstorms as the main driver for above average insured losses in the first half of 2023, this secondary peril becomes one of the dominat global drivers of insured losses.
“The above average lossses reaffirm a 5% to 7% annual growth trend in insured losses, driven by a warming climate but even more so by rapidly growing economic values in urbanised settings globally.”
Higher than your average
It was not just Swiss Re hit by a continuation of this trend either. At the end of last month (27 July 2023), Munich Re also revealed that its predicted natural catastrophe losses for H1 2023 had reached $110bn (£86bn) for a figure “much higher than the 10 year average”.
Munich Re said that the the devastating earthquake in Turkey and Syria was the single event that led to the highest overall losses, with the series of extreme thunderstorms in the US that included tornadoes and hail accounting for roughly one third of overall global losses – equivalent to a predicted cost of $35bn (£27bn), of which $25bn (£19.5bn) was insured.
In a commentary on these results, Thomas Blunck, member of the board of management for Munich Re, explained: ”We need to adapt to handle the consequences of global warming in more frequent or more severe weather disasters much more effectively by employing appropriate construction methods, selecting sites that can withstand future impacts and by having insurance to cover the immediate financial consequences.”
Insurance firms very much have a role to play here – with insured losses from natural catastrophes on the rise it is incumbent on them to ensure that they do not dump petrol on the fire and contribute to climate change.
As Swiss Re pointed out, climate change may not yet be contributing to this upward trend in losses, but we can be sure the picture would not be made better by it.
Ariel Le Bourdonnec, insurance campaigner at Reclaim Finance, told Insurance Times: ”2023 is already shaping up to be another year in which natural disasters will cost insurers dearly. Yet insurers continue to play the role of pyromaniac firefighter by fuelling climate change.”
One method of improving resilience to these losses is to raise prices in areas impacted by natural catastrophes. That does feel somewhat like kicking the can down the road, however.
Obviously insurance companies cannot be expected to take on the costs of climate change themselves, but they could certainly be doing more to mitigate its impacts.
Improving resilience for their customers through government-backed schemes, such as Flood Re, seems a particularly attractive option here.
Maybe we need to pull together to build a Hail Re, a Tornado Re and a Wildfire Re – anyone got a couple of billion lying around?
With a particular focus on regulation, geopolitical and systemic risks and conflict, he has covered the insurance implications of the Ukraine war, riots in France and the commissions scandal for multioccupancy buildings insurance.View full Profile