In a recently released insurance sector report, Bloomberg Intelligence has forecasted that 2023 is poised to mark the third consecutive year in which insured losses stemming from natural catastrophes will surpass $100 billion, primarily due to a surge in weather-related claims.
The report highlights the increasing prevalence of secondary perils such as floods, hail, and wildfires, which have gained momentum in tandem with rising global temperatures.
Notable findings from the report include Munich Re’s assessment of global insured costs for natural-catastrophe events in the first half of the year at $43 billion, while SwissRe places the figure at $50 billion.
This discrepancy in figures notwithstanding, experts from Bloomberg Intelligence assert with confidence that the threshold of $100 billion in claims for weather-related incidents will be crossed for the third consecutive year.
The devastating earthquake that struck Turkey and Syria, resulting in a tragic loss of approximately 58,000 lives, stands as one of the most impactful events of the year.
Regrettably, only a fraction, around $5 billion, of the projected $40 billion cost was insured, underscoring the immense challenges posed by such catastrophes.
Severe thunderstorms in the United States accounted for more than two-thirds of insured losses in the first half of the year. These storms, which brought forth floods, hail, and tornadoes, have become increasingly frequent due to the influence of climate change.
Higher temperatures have facilitated the formation of convective storms by triggering greater water evaporation and elevated humidity at ground level.
Additionally, record temperatures have contributed to the proliferation of wildfires, further exacerbating the global catastrophe tally.
Bloomberg Intelligence also points out that insured natural-catastrophe claims in the first half of 2023 ranked as the second highest since 2011 when adjusted for inflation.
SwissRe’s estimate of $50 billion in insured losses surpasses the 10-year average of $32 billion. Among these losses, weather-related events accounted for $45 billion, with the majority attributed to thunderstorms in the US. Ten specific events resulted in claims exceeding $1 billion each.
The report emphasises the vulnerability of large urban centers to climate change effects. Instances like the heavy rainfall and flooding in Italy’s Emilia-Romagna region, which incurred a $10 billion economic loss but only $600 million to $1.1 billion in insured claims due to limited flood coverage in Italy, underscore the global challenge in risk mitigation.
Kevin Ryan, a senior insurance analyst at Bloomberg Intelligence, highlights that the escalating trend of weather-related claims surpassing $100 billion annually is driven by a combination of factors.
These include intensifying weather events linked to climate change, rising property values, continued urban expansion, and economic growth. The increasing severity of losses is expected to accelerate due to mounting inflation, demanding even more effective disaster response and risk management strategies.
In a year that has already seen such substantial insured losses, including hailstones the size of tennis balls causing significant damage in Texas and widespread storms impacting Slovenia, Austria, and Croatia, the insurance industry is bracing for further challenges ahead.
With the evidence of climate change’s undeniable impact on natural catastrophes, insurers and policymakers are facing the imperative of finding sustainable solutions to protect both lives and livelihoods in the face of mounting crises.
