In its latest sigma report, Swiss Re has forecasted that natural catastrophe insured losses are set to surpass USD 100 billion in 2023, marking the fourth consecutive year and the sixth year since 2017 (inflation-adjusted) that the industry has faced such substantial losses.
The report suggests that the continuous growth in exposure values, fueled by ongoing construction in high-hazard areas, along with rising replacement costs primarily due to inflation, are the key factors contributing to the surge in catastrophe losses.
Preliminary estimates indicate insured losses of at least USD 80 billion in the first nine months of 2023, surpassing the 10-year average of USD 74 billion (inflation-adjusted) for the same period.
Severe convective storms in the United States have been a major driver of losses, with devastating earthquakes in Turkey and Syria, notably the February 2023 event, adding to the toll.
This earthquake alone is estimated to have resulted in insured claims of USD 6 billion, making it the costliest insured loss event of the year so far.
The report highlights that the property insurance sector continues to experience a significant upward trend in claims, attributed to higher replacement costs today compared to two years ago.
While construction material cost pressures have eased, elevated construction costs persist due to higher wages and financing costs resulting from tighter monetary policies.
Swiss Re anticipates that economic inflation’s impact on claims will gradually ease throughout 2024 and 2025. However, the report warns that more structural trends such as social inflation and increasing exposure to natural catastrophes are likely to regain prominence in shaping claims dynamics.
