Swiss Re has estimated that insurance industry losses from natural catastrophes and man-made disasters amounted to a total of $83 billion in 2020, making it the fifth-costliest year since 1970.
Losses were primarily driven by a record number of severe convective storms, Swiss Re data shows, as well as wildfires in the US.
Overall, secondary perils accounted for 70% of the total $76 billion cost of natural catastrophes, while North Atlantic hurricanes were responsible for around $20 billion of losses.
Swiss Re warns that secondary perils are likely to continue to increase in cost as climate change exacerbates the conditions that trigger wildfires, storm surges and flooding.
“As with COVID-19, climate change will be a huge test of global resilience. Neither pandemics nor climate change are ‘black swan’ events. But while COVID-19 has an expiry date, climate change does not, and failure to ‘green’ the global economic recovery now will increase costs for society in future,” said Jerome Jean Haegeli, Swiss Re Group Chief Economist.
“This year’s natural disasters impacted regions with more insurance cover in place, providing vital support to the people and communities affected and enhancing their financial resilience.”
There were 30 named storms in the 2020 North Atlantic hurricane season, including five named storms that made landfall in the US state of Louisiana alone.
However, most US landfalls did not hit densely populated areas, resulting in relatively low insured losses of USD 20 billion, far lower than in the previous record hurricane seasons of 2017 ($97 billion) and 2005 ($87 billion).
”Large-scale climate conditions in the North Atlantic suggest elevated hurricane activity for 2021 and likely beyond. This increases the probability of a catastrophic landfall. Combined with the loss impact of secondary perils accelerated by climate change, insured catastrophe losses will only rise in the future,” said Martin Bertogg, Head of Cat Perils at Swiss Re.
In addition to storms and wildfires across North America and Australia, Europe was hit by severe winter storms in February, causing flooding, power outages and transport disruption, with more than $2 billion combined insured losses.
And in May, cyclone Amphan in the Bay of Bengal caused economic losses of $13 billion, the most destructive tropical cyclone India has ever experienced. Insured losses are expected to be just a fraction of the economic losses due to the region’s low insurance penetration.
Swiss Re noted that its loss estimates are for property damage only and exclude any claims related to the COVID-19 pandemic.