For the fifth year since 2017, insurance and reinsurance industry losses from natural catastrophe events exceeded the $100 billion threshold in 2022 at a huge $140 billion, reports reinsurance broker Gallagher Re.
The broker’s 2022 Natural Catastrophe report, published today, notes another year of complex natural disaster events in 2022, which resulted in direct economic losses of $360 billion.
Of this, almost 39%, or $140 billion, was covered by insurance, leaving a global protection gap (disparity between economic and insured losses post-event) of 61%, or $220 billion.
According to Gallagher Re, of the insured loss total, private insurers covered $125 billion of losses and public insurance entities covered another $15 billion.
In the U.S., Hurricane Ian was the most costly and impactful event of 2022, with Gallagher Re warning of a minimal insured loss of $55 billion, and an overall economic loss of $112 billion from the storm in the states alone.
Also in the U.S., a severe drought resulted in $9 billion in crop insurance industry payouts in 2022, while three severe convective storm (SCS) outbreaks drove a multi-billion dollar insured loss. The broker says that this helped 2022 in becoming the 15th consecutive year with aggregate SCS losses of above $10 billion, and the eighth year since 2010 that such losses have exceeded $20 billion.
Steve Bowen, Chief Science Officer at Gallagher Re, said: “The financial cost of natural hazards continues to increase, and we are further recognizing that a consistently high global protection gap – 61% in 2022 – means that much more opportunity exists to help people prepare before and after a disaster occurs. As catastrophe losses grow more expensive, we again look to the connected nature of climate change, exposure growth, and social inflation as important issues enhancing eventual loss costs. The increase in severity, and in some cases the frequency of “secondary” peril events, presents (re)insurers with a multi-faceted and complicated challenge when it comes to risk protection and mitigation.
“How we collectively bring together financial institutions (insurance, asset managers, real estate, banking), governmental entities, academia, and emergency management to identify risk will be critical as we implement actionable plans to improve our resilience, mitigation and adaptation-readiness. Such action will result in favorable impacts when trying to slow the rate of annual catastrophe loss growth.”
The devastating flooding in Pakistan during the prolific monsoon season was, outside of the U.S., the costliest event and one of the most consequential from a humanitarian perspective, says Gallagher Re.
According to the World Bank, it’s expected to drive a $15 billion direct physical damage economic loss, with more than 1,700 fatalities reported, 2.3 million homes damaged, and 33 million people affected across 90 districts.
Severe flooding was also seen in several parts of Africa in 2022, where countries such as Nigeria and South Africa are facing some of the costliest nat cat events for insurers on record.
Elsewhere, a third consecutive La Niña brought record rainfall to parts of Eastern Australia. The country’s insurance council has reported that this has led to payouts of almost $5 billion, with most of this coming from the historic flood event in Late February and March.
Other global events that occurred in 2022, noted by Gallagher Re, includes a series of record summer heatwaves in Europe; a powerful March offshore earthquake in Japan; record SCS activity in France; drought conditions in South America, Europe, and parts of Asia; typhoon landfalls in Japan and the Philippines; Hurricane Fiona’s landfall in Puerto Rico and Canada; European windstorms; and an intense May Derecho event in Canada.
“The fingerprints of climate change were visible on virtually every major weather and climate event in 2022, once again highlighting the urgency to implement proper planning and investment strategies that will limit the risk to life and property. The implications of climate change on daily weather and climate events continues to be more evident and better understood. While we are still trying to account for uncertainties that exist in how climate change may influence events on a regional and per peril basis, it is clear that impacts from the phenomenon are not future tense. They are already being felt today,” said Bowen.
These estimates from Gallagher Re come after re/insurance broker Aon announced that global insured losses caused by natural disasters exceeded $130 billion in 2022.
Similarly, Munich Re pegged global insured nat cat losses at $120 billion for the year, while Swiss Re warned back in December that Hurricane Ian had resulted in year-to-date, estimated insured nat cat losses of $115 billion.
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