Swiss Re reveals huge spike in insured losses is coming

Swiss Re reveals huge spike in insured losses is coming | Insurance Business New Zealand

Reinsurance

Swiss Re reveals huge spike in insured losses is coming

Last year set a new high – and there’s worse to come

Reinsurance

By
Kenneth Araullo

Swiss Re Institute’s latest projections suggest that insured losses could double over the next decade, exacerbated by rising temperatures and more frequent and intense extreme weather events, underscoring the critical need for mitigation and adaptation efforts.

In 2023, natural catastrophes, including a major earthquake in Turkey and Syria, severe convective storms (SCS), and widespread urban flooding, pushed insured natural catastrophe losses to $108 billion. This escalation continues a 5-7% annual increase in global insured natural catastrophe losses observed since 1994.

Over the past three decades, global insured losses from natural disasters have also managed to outstripped global economic growth, with inflation-adjusted insured losses averaging 5.9% annually compared to a 2.7% global GDP growth. This disparity has led to a doubling of the relative loss burden compared to GDP from 1994 to 2023.

“Global natural catastrophe losses in 2023 were severe, even in the absence of a historic storm like the previous year’s Hurricane Ian,” group chief economist Jérôme Jean Haegeli said. “This trend over the last 30 years, fueled by asset accumulation in areas prone to natural catastrophes, is now compounded by climate change, leading to more severe storms and floods. The urgency for action is highlighted by rising post-disaster costs due to structurally higher inflation.”

Record-setting year

In 2023, the earthquake in Turkey and Syria was the most catastrophic event, with estimated insured losses of $6.2 billion. The year also set a new record with 142 insured natural disasters, many of which were of medium severity, contributing to $1-5 billion in losses each. SCS, particularly hailstorms, emerged as a significant contributor to insured losses, with the US accounting for 85% of the global insured losses from SCS, which totaled a record $64 billion.

Moses Ojeisekhoba, Swiss Re’s CEO Global Clients & Solutions, noted an evolving risk landscape due to climate change, stressing the need for risk assessments and insurance premiums to adapt.

“With 2023 marking the hottest year on record and 2024 starting similarly, ensuring the sustainability and affordability of property insurance demands collaborative efforts from the private sector, public authorities, and society at large to both mitigate and adapt to increasingly severe weather conditions,” Ojeisekhoba said.

To combat rising losses, particularly from SCS, which have been exacerbated by economic growth, urbanization, and climate change, the industry is looking towards adaptation measures such as enforcing building codes, constructing flood barriers, and limiting settlements in high-risk areas. Collaboration among insurers, associations, and public entities was deemed crucial for exchanging data and mitigating risks effectively.

What are your thoughts on this story? Please feel free to share your comments below.