This year is shaping up to be another above average 12 months for global catastrophes with the first half of 2023 already above average for natural catastrophe losses.
Led by US thunderstorms and global impacts from El Niño’s arrival, total direct economic losses from natural hazards for the first half of the year were preliminarily estimated at $138 billion, according to global reinsurance broker Gallagher Re’s H1 2023 Natural Catastrophe Report.
It comes as the National Oceanic and Atmospheric Administration (NOAA) and the World Meteorological Organization (WMO) declared the official arrival of El Niño, which is poised to have further influence on global weather / climate events through the end of the year.
Gallagher said the cost covered by private insurance or public insurance entities was already $52 billion, which has created a protection gap of 63% ($86 billion).
The totals for solely weather / climate events (excluding earthquakes or other non-atmospheric-driven perils) were $92 billion (economic) and $46 billion (insured), in the first six months of 2023. These totals, which may be rounded in some cases, are subject to change as loss development occurs and new data is obtained in the weeks and months ahead.
Severe convective storm (SCS) perils have so far been the dominant issue for insurers so far this year.
“A very active pattern led to prolific series of widespread outbreaks across the United States that resulted in at least $34 billion in insured losses,” the report added. “It was expected that continued loss development could push 2023 past 2011 as the costliest first half of the year in record for US SCS insured losses. For all perils, the US accounted for 76% of all global insured losses. Thunderstorms in Europe during June also brought a billion-dollar insurance bill to parts of Germany and France.
Overall, the total preliminary H1 insured loss was 18% higher than the decadal average ($44 billion) and 39% above the 21st Century average ($38 billion).
Gallagher Re chief science officer Steve Bowen said the changing climate would redefine the threat from natural perils and that insurers and government needed to be aware of the changes needed to be made.
“The physical risks associated with natural hazards, and the financial and human costs associated with these events, continue to grow,” he explained. “We witnessed a series of significant events during the first half of 2023 that puts further spotlight on the need to close the protection gap by better preparing for the increasingly consequential events that the world continues to endure. The arrival of El Niño brings the potential for even more global disruption and impacts from weather and climate events through at least the rest of the year.
“While El Niño historically causes the globe to become warmer and leads to more volatile weather patterns, the ongoing influence from climate change will only amplify associated impacts to life and property. To put it simply, extreme weather / climate events are anticipated to become more severe.”
Bowen concluded: “Governments and private organizations are accelerating their investments to help ensure the world is proactively prepared to handle our quickly evolving physical and non-physical hazard-related challenges. Climate change is often discussed in future tense, but we are already seeing more evidence of its effects today.”