Global natural catastrophe economic losses reached an estimated $77bn in the first quarter of 2023, with public and private insurance entities covering at least an estimated $22bn of that total, resulting in a 72% or $55bn protection gap, Gallagher Re reported.
According to the broker’s Q1 2023 Natural Catastrophe report, these losses are the highest Q1 total since 2011. They were led by the powerful and devastating earthquakes in Turkey and Syria and severe convective storms (SCS) in the United States, Q1 2023.
The February earthquake sequence in Turkey and Syria accounted for an estimated $45bn in physical damage costs with total insured losses anticipated to approach $5bn, the largest industry loss for the Turkey market on record, according to Gallagher.
Weather or climate-related catastrophes economic losses, excluding the earthquake peril, were minimal, an estimated $31bn. Public and private insurers covered $17bn, slightly more than half of those losses.
According to the report, the bulk of the losses were associated with record Q1 SCS activity in the US, with economic losses at more than $13bn and insured losses at more than $10bn; a prolific series of Atmospheric River events in California; historic flooding in New Zealand; and ongoing major drought conditions across South America.
“The Turkey earthquake sequence was a difficult reminder of the significant vulnerabilities that exist to life and property from seismic events,” said Gallagher Re Chief Science Officer Steve Bowen.
“As the private and public sectors work together to develop a more resilient and adaptive society to current and future climate change risk, it is imperative that all natural hazard types, and not just weather or climate perils, are considered in the planning discussions.”
Bowen added: “The high-dollar loss costs observed in Q1 2023, including those from notable thunderstorm and flood-related events, were marked by notable gaps in insurance coverage across both developed and emerging economic territories.
“This highlights the continued opportunity to develop tools and products that not only identify or quantify risk, but to make meaningful strides to ensure equitable protection for communities around the world.”
The report also noted that above average global temperatures and the transition from La Niña to El Niño influenced weather events across the globe.
Land and ocean temperatures during this year’s first quarter ranked as the fourth-warmest since 1850, per National Oceanic and Atmospheric Administration (NOAA).
There were also distinct differences in precipitation extremes with parts of Asia, Europe, Latin America and North America that saw a continuation of limited precipitation that exacerbated severe drought conditions.
Additionally, other areas, such as parts of the US, Africa, Oceania and the Middle East, registered record-setting rainfall that prompted widespread and significant flooding.
Gallagher Re highlighted that a key consequence to expect from the transition from La Niña to El Niño is the warming of global surface temperatures as well as global precipitation and tropical cyclone patterns.
For the re/insurance industry, according to Bowen, “the transition of El Niño brings a pivot in terms of physical loss and humanitarian impact potential around the world.”
He added: “Since El Niño correlates to warmer surface conditions, this allows for more volatility in weather patterns that can prompt floods to be more prolific and droughts to be more intense.
“This puts specific pressure on written agricultural insurance products or those in development. Additionally, an increased frequency potential of tropical cyclones in East Asia may bring higher regional catastrophe losses.”
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