World facing $100 billion bill for 2023 natural catastrophes

Natural catastrophes are set to cost the world’s (re)insurers the second highest total for 12 years new research has revealed.

A new insurance sector report from Bloomberg Intelligence estimates that insured losses from natural catastrophes in the first half of this year indicate 2023 being the third straight year of weather-event claims topping $100 billion, with much of these coming from secondary perils such as floods, hail and wildfires. All of the latter are becoming more frequent as global temperatures rise.

Weather losses dominated insured natural-catastrophe claims in the first six months of the year, contributing to the second-highest level since 2011 (on an inflation-adjusted basis). Insured losses, estimated by Swiss Re at $50 billion compared to the $32 billion 10-year average. Weather events cost $45 billion, of which thunderstorms in the US made up $34 billion, with claims from 10 events totalling over $1 billion each.

BI said events elsewhere illustrate the vulnerability of large urban centres to climate-change effects. Heavy mid-May rainfall and flooding in Italy’s Emilia-Romagna region drove a $10 billion economic loss, yet only $600 million-$1.1 billion of insured claims, given flood risk in Italy (like other European countries) isn’t covered under standard building insurance. Flooding in Auckland, New Zealand’s second largest city, cost $1.3 billion in January.

Charles Graham, senior insurance analyst at Bloomberg Intelligence, commented: “Munich Re puts total global insured costs of natural-catastrophe events in H1 at $43 billion and Swiss Re at $50 billion, so it seems certain that 2023 claims for weather-related incidents will probably exceed $100 billion for the third year in a row. The earthquake across Turkey and Syria was the most devastating episode – involving the loss of an estimated 58,000 lives – yet only about $5 billion of the projected $40 billion cost was insured.

“More than two-thirds of H1 insured losses from natural catastrophes were as a result of severe thunderstorms in the US which brought floods, hail and tornadoes. Climate change facilitates the formation of convective storms, since higher temperatures result in greater water evaporation and increased humidity at ground level. Record temperatures have also sparked numerous wildfires.”

Hailstones are getting bigger, the report highlighted, and with it the damage they can do. Thunderstorms which wrought severe damage in Texas in mid-June saw hailstones measuring as much as 12 centimetres in diameter. Such events aren’t limited to the US, as heatwaves elsewhere have been followed by violent storms. Rainstorms in the first week of August resulted in flooding, landslides and a number of deaths in Slovenia, Austria and Croatia.

Kevin Ryan, senior insurance analyst at Bloomberg Intelligence, added: “This year is on track to be the third sequential year when insured losses from weather related events top $100 billion. Swiss Re anticipates that the insured cost of natural-catastrophe claims has increased at an annual growth rate of 5-7% since 1992. Mounting inflation looks likely to see that pace accelerate. Driving the longer-term trend is a combination of greater loss severity caused by rising property values, continued urban expansion and economic growth and the increasing intensity of weather events linked to climate change.

Weather losses dominated insured natural-catastrophe claims in the first six months of the year, contributing to the second-highest level since 2011