The $100 billion insured loss threshold from natural catastrophes in 2023 has now been breached, marking the sixth year since 2017 that this has occurred, according to Gallagher Re’s Chief Science Officer, Steve Bowen.
Bowen noted that Gallagher Re continues to “believe that $100 billion insured loss years is becoming the benchmark moving forward.”
He also observed that thus far, the $100+ billion has almost solely been driven by high frequency/lower dollar ‘secondary’ events versus low frequency/higher dollar ‘primary’ events.
“This is one of the few years where we’ve hit $100+ billion without a major ‘primary’ event driving loss costs. Significant landfalling tropical cyclones or major earthquake(s) have helped drive a larger portion of losses in years such as 2005, 2011, 2017, 2018, 2020, 2021, 2022. In 2023? Not so much,” Bowen said.
He added that this year, “these so-called secondary perils” have driven more than 80% of insured losses globally.
Further, the US alone has recorded $56 billion in severe convective storm (SCS) insured losses through the first few days of November.
Bowen continued, “Is it really surprising that ‘secondary’ perils are driving most losses? The honest answer is no. When looking at annual insured losses on an aggregate basis, here are how many years since 2000 in which ‘Primary’ or ‘Secondary’ perils drove a majority of losses: Primary: 3 (2004, 2005, 2017) Secondary: 20 (21 — if 2023 holds its current trend).
“This is an important point as we head into upcoming reinsurance renewal cycles. As insurance carriers continue to see growing losses from non-peak perils, it’s going to lead to more creative means to gain access to greater reinsurance protection.”
He concluded, “We can look to reasons such as more damaging events influenced by climate change, annual extreme weather/natural catastrophe volatility, greater volume of exposed assets, higher replacement costs, inflation, and growing insurance penetration as to why losses will likely keep increasing.
“This should no longer by a surprising narrative. We need to switch to a proactive stance versus our natural reactive mindset to guarantee better protection and mitigation against loss potential before it is realized.”
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