Swiss Re has warned that a cocktail of climate change, land use planning in more exposed coastal and riverine areas, and urban sprawl into the wilderness, now generate a hard-to-revert combination of high value exposure in higher risk environments.
The warning came as part of its latest Swiss Re Institute report into nat cat losses, which reported that a series of widespread thunderstorms that hit the US accounted for 68% of global insured natural catastrophe losses in the first half of 2023, highlighting the increasing loss impacts of secondary perils.
Martin Bertogg, head of Catastrophe Perils at Swiss Re, said: “With severe thunderstorms as the main driver for above-average insured losses in the first half of 2023, this secondary peril becomes one of the dominant global drivers of insured losses. The above‑average losses reaffirm a 5 – 7% annual growth trend in insured losses, driven by a warming climate but even more so, by rapidly growing economic values in urbanised settings, globally. The cyclone and flood events in New Zealand in the first quarter of 2023 are testimonies of the risk to today’s large urban centres, continuing patterns observed in 2021 in the Germany flooding, and in 2022 in Australia and South Africa.”
According to the latest Swiss Re Institute report, severe convective storms – storms associated with thunder, lightning, heavy rain, hail, strong winds and sudden temperature changes – caused $35 billion (nearly 70%) in insured losses worldwide in the first half of 2023. This means that insured losses are almost twice as high in a six-month period as the annual average of the last ten years ($18.4 billion).
In the US, a series of severe thunderstorms prompted insured losses of $34 billion in the first half of 2023, the highest ever insured losses in a six-month period. Ten events caused losses of $1 billion and above each, compared to an annual average of six events for the previous ten years. The most affected state was Texas.
New Zealand was hit by two severe weather events just two weeks apart in early 2023, highlighting the growing risk of weather-related perils hitting large urban centres. In particular, the North Island of New Zealand was hit in quick succession in the first quarter with severe flooding in Auckland, the country’s largest city, and the remnants of Cyclone Gabrielle.
Both became the two costliest weather-related insured loss events in New Zealand since 1970, with combined insured losses estimated to be $2.3 billion.
Swiss Re said that the effects of climate change are evident in increasingly extreme weather events. Jérôme Jean Haegeli, Swiss Re’s Group Chief Economist, said: “The effects of climate change can already be seen in certain perils like heatwaves, droughts, floods and extreme precipitation. Besides the impact of climate change, land use planning in more exposed coastal and riverine areas, and urban sprawl into the wilderness, generate a hard-to-revert combination of high value exposure in higher risk environments. Protective measures need to be taken for insurance products to remain economical for such properties at high risk. It is high time to invest in more climate adaption.”