Reinsurance giant Munich Re has reported overall losses from natural disasters of $110 billion for the first half of 2023, with the insured loss from these events amounting to $43 billion.
It is noteworthy that the first half of 2023 is a continuation of the recent run of years with high losses for the insurance and reinsurance industry.
Although overall losses were lower than H1 2022, which was $120 billion, it was still well above the average for the last ten years ($98 billion, inflation-adjusted), notes the reinsurer.
The trend can be seen in the insured loss figure as well, which stand at $43 billion, so down on H1 2022’s $47 billion, while the ten-year average for half-year insured losses is just $34 billion.
As highlighted by Munich Re, less than 40% of overall losses in H1 2023 were insured, which shows that the large insurance gap still persists in many countries for multiple natural hazards.
In fact, Munich Re states that insurers and reinsurers bore around 35% of worldwide losses in terms of the average half-year losses in the period 2013–2022.
This year, the most impactful event was the earthquake in Turkey and Syria, estimated at an economic cost of $40 billion, with Syria accounting for roughly $5 billion of this.
What’s stark is that despite the establishment of the Turkish Catastrophe Insurance Pool (TCIP), which provides compulsory insurance for residential buildings in Turkey and now has insurance penetration of more than 50%, the insured portion of overall losses amounts to just $5 billion.
Thomas Blunck, Member of the Board of Management at Munich Re, commented, “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.”
Elsewhere, a series of extreme thunderstorms, including tornadoes and hail, in the U.S. account for roughly one-third of overall global losses totalling more than $35 billion, of which more than $25 billion was insured. The costliest single event of the year so far was a series of thunderstorms in mid-June, which affected large parts of Texas. The overall loss for this outbreak is estimated at around $8.4 billion, of which approximately $7 billion was insured, says Munich Re.
“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,” said Ernst Rauch, Chief Climate and Geo Scientist at Munich Re.
Rauch concluded, “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.”
