A new Gallagher Re report has suggested that a single event, or a series of large events, resulting in an insured loss of $115 billion to $125 billion above expected average annual catastrophe losses, would be required to meaningfully impact the trajectory of pricing in the property re/insurance industry.
The finding comes from the global reinsurance broker and advisory firm’s Q1 2026 Natural Catastrophe and Climate Report, which highlighted a relatively low and manageable level of high-cost natural catastrophe activity during the opening quarter of the year.
Gallagher Re said this environment has left insurers’ annual catastrophe budgets well supported, placing the industry in an even stronger position to absorb future major individual events, as well as the cumulative impact of more frequent mid-sized losses.
The firm estimated that total economic losses from all natural perils reached at least $58 billion, around 12% below the 10-year Q1 average.
Of this, losses covered by private insurers and public insurance entities totalled at least $20 billion, representing a 26% decline from the decadal average. This figure is in line with Aon’s estimate from its Q1 Global Catastrophe Recap.
Elsewhere in the report, Gallagher Re highlighted the growing impact of severe convective storms (SCS), namely tornadoes, hail, and straight-line winds, in the US, alongside the complex web of hazard and non-hazard drivers that have contributed to the steadily increasing cost trajectory of insured losses attributed to the peril since 2008.
Since 2008, the industry has incurred aggregate nominal (actual) losses above $20 billion on nine occasions, above $30 billion five times, and above $50 billion in each of the past three consecutive years alone (2023–2025).
Gallagher Re’s report found that macroeconomic and socioeconomic forces, rather than weather or climate factors, are driving the majority of the increase in losses.
“An estimated 80%-90% of the annual nominal growth in US SCS losses this century is attributable to non-hazard related factors, including rising replacement costs, social inflation, growth of more vulnerable exposure, construction, and labor costs, and an extreme volatility of global oil/energy prices which drives higher asphalt material prices,” the firm added.
Gallagher Re continued, “The post-2008 SCS loss environment has been significantly influenced by claims inflation and labour market constraints. The rise of assignment of benefits (AOB) agreements, increased claims litigation, ‘neighboritis’, and fraudulent claims have further increased Loss Adjustment Expense (LAE) costs. While regulatory reforms in some states have curbed AOB activity, the broader trend of escalating per-claim costs continues to challenge the insurance industry.”
Gallagher Re’s Chief Science Officer, Steve Bowen, commented, “The rise in US SCS losses has been staggering since 2008. While climate change has continued to influence weather patterns, the direct links to SCS remain less clear in its contribution to the growth in loss costs during the past nearly 20 years.
“When taking a deeper dive into broader socioeconomic and macroeconomic factors, it becomes clear that volatility linked to the energy market, construction/labour costs, social inflation, and how / where people live are the main drivers of these higher losses.
“Recognising and incorporating these hugely important factors will remain central to effective underwriting, pricing, and portfolio management. How we limit future loss volatility will depend as much on building smarter and more resilient structures, as it does on understanding the scientific facts of the peril.
“This will be particularly important as costlier exterior-mounted technologies and the growth in data centre exposure add new loss potential.
“The insurance industry must continue to broaden its lens to account for more macroeconomic, socioeconomic, geopolitical, and scientific factors when assessing SCS loss potential. This is true not only in the US, but also internationally, as SCS losses grow in Europe, Asia, and Oceania.”
