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Swiss Re estimates 2022 insured cat losses at $132bn

22nd March 2023 - Author: Matt Sheehan

Global reinsurer Swiss Re has estimated that total insured losses from both natural and man-made catastrophes amounted to $132 billion last year, with economic losses thought to be more than double this figure at $284 billion.

The insured total consists of $125 billion of losses from natural disasters and $7 billion from man-made ones, Swiss Re reports, while the economic loss total reflects $275 billion from nat cats and just $9 billion from man-made events.

With Hurricane Ian in Florida, record breaking losses from hailstorms in France, floods in Australia and South Africa, winter storms in Europe and the US as well as droughts in Europe, China and the Americas, 2022 was the second consecutive year in which insured losses from natural catastrophes exceeded the $100 billion mark, Swiss Re notes.

Nevertheless, insured losses were fairly consistent with the 2021 figure of $130 billion of insured losses, while economic losses were in fact lower than the previous year’s $303 billion, according to the estimates.

However, last year’s losses do reaffirm the longer-term trend of a 5-7% average annual increase in insured losses over the past three decades, Swiss Re notes, with the insured and economic total also both sitting well above the 10-year averages of $91 billion and $220 billion, respectively.

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“The magnitude of losses in 2022 is not a story of exceptional natural hazards, but rather a picture of growing property exposure, accentuated by exceptional inflation”, said Martin Bertogg, Head of Catastrophe Perils at Swiss Re.

“While inflation may subside, increasing value concentration in areas vulnerable to natural catastrophes remains a key driver for increasing losses. For our industry this is a call both to reflect the latest exposure even more carefully in risk assessments while continuing to support society in being better prepared.”

Swiss Re highlights economic growth and accumulation of property assets in exposed areas as among the main loss drivers for high loss figures last year, aggravated by exceptional inflation pressure.

Demand for coverage has grown alongside an uptick in the frequency and severity of catastrophe events, it notes, while at the same time inflation rises averaged 7% in advanced economies and 9% in emerging economies last year.

The effect of high prices has been to increase the nominal value of buildings, vehicles and other insurable assets, thus pushing up insurance claims for damage caused by natural catastrophes.

“The economic storm is not over, and interest rates will likely have to increase further given existing inflation pressure. This means higher financing costs and, as a result, capacity providers are likely to remain more cautious in deploying capital for a number of reasons, including risk assessment and loss experience,” said Jérôme Jean Haegeli, Swiss Re’s Group Chief Economist.

“In our view, as higher exposures encounter shrinking risk appetite, momentum for rising prices, higher retentions and tighter terms and conditions will likely continue,” he added.

Another factor contributing to high losses in 2022 was the impact of Hurricane Ian, which made landfall in Florida in September as a Category 4 storm and resulted in estimated insured losses of $50–65 billion, making it the second-costliest nat cat event on record, after Hurricane Katrina.

Meanwhile, other parts of the world also experienced record-breaking weather, with storms in northwestern Europe causing losses almost double the 10-year average, hailstorm driving the highest ever annual loss in France, and Australia experiencing its biggest ever catastrophe claims event from flooding.

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