With the annual average loss from natural catastrophes between 2017 and 2024 costing insurers $146 billion, Gallagher Re has suggested the ‘new normal’ for annual insured losses is approaching $150 billion.
As per the broker’s new Natural Catastrophe and Climate Report, the estimated total direct economic costs from global natural perils in 2024 were $417 billion.
The private insurance market, alongside public insurance entities, reportedly covered $154 billion of this total, meaning the protection gap stood at 63%, or $263 billion.
According to Gallagher Re’s new report, the $417 billion total direct economic costs were 15% above the decadal average of $361 billion and 16% above the most recent 20-year average.
The broker observed 60 individual billion-dollar events in 2024, which is the fifth-highest level ever recorded. At least 33 of those events were recorded in the United States alone.
“The overall economic toll in 2024 was not record-setting, but it further reinforced the vulnerabilities the world continues to face from costlier ‘non-peak’ peril occurrences affecting large population centres,” Gallagher Re said.
The $154 billion of nat cat losses covered by the private insurance market or publicly run insurance entities in 2024 was 27% above the decadal average ($121 billion), and a further 44% higher than the previous 20-year average ($107 billion).
Gallagher Re’s report noted that the SCS peril was a dominant factor in the frequency of mid-value loss costs, and accounted for 41% of all insured losses globally.
“This again illustrates the importance of this peril to the global re/insurance industry,” the firm added.
Gallagher Re also suggested that the annual rate of insured losses is growing faster than the overall economic total.
The firm expects more damage costs to be covered as insurance penetration increases in regions with low policy take-up and as public-private partnerships expand. Additionally, a larger share of losses is anticipated to be covered by government-sponsored insurance entities.
However, while progress continues in addressing gaps in global insurance protection, Gallagher Re underlined that the hard reality is that many vulnerable regions in the world remain uninsured.
“The need for more guaranteed climate or natural catastrophe financing to mitigate, adapt, or transition economies to more green-based energy production is critical, especially as the complexity of compound risk becomes that much more challenging,” the firm said.
The broker’s report continued, “While 2024 was not a record year for total loss costs, we are continuing to witness the ongoing influence of climate change on the behaviour of individual events and broader weather patterns.
“2024 officially became the warmest year on record dating to 1850, and scientists believe it was the warmest year in the last 125,000 years. Scientific research is concluding that there are differences in what a climate change influence looks like on an individual peril basis and how certain parts of the world will be affected.
“The fingerprints of climate risk do undeniably exist on many individual events. One must understand that climate risk is not solely an issue for physical damage potential, however, and the non-physical implications are substantial. This may affect sectors such as real estate, agriculture, industry and manufacturing; as well as impacting health and retirement, and the long-term strategies of investors.
“The reduction of greenhouse gas emissions is essential to this process, and this will be vital in stabilising or reducing the impact of future extreme weather events. The insurance industry maintains a critical role in addressing and working to mitigate climate risk, but it must be done collectively with other private and public market stakeholders.”
The post Annual insured nat cat losses of ~$150bn becoming the ‘new normal’: Gallagher Re appeared first on ReinsuranceNe.ws.
