Munich Re puts H1 insured cat losses at $43bn, well below broker estimates

Global reinsurance giant Munich Re has issued a preliminary estimate of $43 billion for first-half 2023 natural disaster insured losses around the globe, a figure that is well below the estimates issued by leading reinsurance brokers.

Broker estimates of industry catastrophe losses are often the highest figures, but typically it is by a relatively small margin.

This is because the broking groups often capture a range of smaller events in their catastrophe loss reports, than the major reinsurance firms.

But this year, the disparity between Munich Re’s announcement today of a $43 billion catastrophe industry loss estimate for the first-half of the year, and the announcements from some broking groups, is much more significant.

Gallagher Re was the first to report, pegging global insurance and reinsurance industry losses from natural hazards at $52 billion for the first half of 2023.

That was followed by Aon, which said natural disaster losses covered by the insurance and reinsurance industry reached an estimated $53 billion in H1.

The wider disparity between the reporting makes comparison more difficult, but it seems that the severe convective storm (SCS) activity in the United States is where the gap lies.

Aggregated severe convective storms (SCS) in the United States drove the largest share of losses for all three reports so far.

Gallagher Re and Aon both pegged US SCS insured losses for the first-half at $35 billion, but Munich Re only puts this figure at $25 billion, which perhaps explains the gap in the H1 total.

However, given reinsurer RenaissanceRe said second-quarter severe convective storms (SCS) alone could drive industry losses approaching $30 billion, as we reported this morning, it seems very likely the Munich Re figure and perhaps the broker figures may get revised upwards anyway.

Commenting on the convective or severe thunderstorm activity, Munich Re explained, “Losses of this magnitude from severe thunderstorms in the USA now seem to be normal occurrences, rather than outliers. After adjustment for inflation, higher first- half thunderstorm losses have only occurred once before in the USA (in 2011, with US$ 46bn in overall losses and US$ 29bn in insured losses).”

Overall economic losses from natural disasters from the first-half are pegged at $110 billion by Munich Re, and while insured are much lower at $43 billion, the reinsurer said this is still much higher than the 10-year average.

Under 40% of losses were therefore covered by insurance, with major events such as the earthquakes in Turkey and Syria going largely uncovered.

Thomas Blunck, Member of the Board of Management at Munich Re said, “The earthquake disaster in Turkey and Syria illustrates the importance of robust and safe buildings. The primary aim must be to save lives. The next step is to reduce losses in such catastrophes. We also need to adapt to handle the consequences of global warming in the form of 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. This is starkly illustrated by the loss figures for the first half of 2023.”

Looking ahead, Ernst Rauch, Chief Climate and Geo Scientist at Munich Re highlighted both climate change and El Niño as factors the insurance and reinsurance industry needs to watch.

“The effects of climate change are having a stronger and stronger impact on our lives. The first half of 2023 was characterised by record temperatures in many regions of the world, very high water temperatures in various ocean basins, droughts in parts of Europe, and severe wildfires in northeastern Canada,” Rauch said.

Adding that, “As in 2016, the natural climate phenomenon El Niño is playing a role in 2023. It is characterised by a temperature swing in the Pacific that influences extreme weather in many regions of the world and causes temperatures to temporarily rise further. All the same, research on global temperature trends is unequivocal: rising water and air temperatures worldwide are mainly driven by climate change, in turn causing more weather-related natural disasters and financial losses.”