The global economic cost of natural catastrophe events reached an estimated $357 billion in 2023, of which approximately 34%, or $123 billion was covered by re/insurance, as broker Gallagher Re reports an annual record of 34 individual billion-dollar insured loss events in the year.
The reinsurance broker’s 2023 Natural Catastrophe and Climate Report reveals that 2023 was the fourth consecutive year in which global insured losses from nat cats exceeded the $100 billion mark.
The dominant driver of losses in 2023 was the severe convective (SCS) storm peril, which accounted for roughly 58%, or a record $71 billion of the global insured loss total, of which the U.S. accounted for $60 billion. According to Gallagher Re, six of the top 10 most expensive insured events of the year were SCS events in the U.S.
“Peak’ perils are still anticipated to drive the highest individual event losses. However, the continued growth of damage from ‘non-peak/secondary’ perils, such as SCS, is changing the way we view and plan for natural catastrophe risk. It also increases the importance of analytics and catastrophe modeling to properly gauge how a combination of climate change-influenced event behavior and socioeconomic parameters are leading to higher loss potentials,” said Steve Bowen, Gallagher Re’s Chief Science Officer.
At $357 billion, the economic loss total surpassed $300 billion for the eighth consecutive year in 2023, and excluding losses from earthquakes and other non-atmospheric-driven events, the economic loss total falls to $301 billion and the insured loss total declines to $116 billion.
What is clear from the figures is that the protection gap (disparity between economic and insured losses) remains large across the globe.
On an economic basis, the February earthquake in Turkey and Syria was the costliest event of 2023 with losses of $46.2 billion. However, just 13%, or $6.1 billion was covered by insurance. This event, alongside the Marrakech-Safi earthquake in Morocco, Typhoon Doksuri in China, and Hurricane Otis in Mexico, contributed to the 66% global protection gap in 2023.
“We continue to witness an increase in the severity and high-impact frequency of natural catastrophe events. These effects bring multifaceted and complex challenges to the (re)insurance industry, as the importance of blending today’s view of risk with the anticipated downstream implications of tomorrow grows more critical,” said Bowen.
“While we continue to witness an expansion of insurance protection into vulnerable parts of the world, there remain considerable gaps in coverage that leave many developing countries highly exposed to catastrophe risk. The need for more guaranteed climate or natural catastrophe financing to mitigate or adapt to a more complex world of natural hazards becomes more critical by the day. The growth of private and public sector partnerships bringing new insurance options to underserved communities is a promising trend that needs to further accelerate,” he added.
Gallagher Re’s comprehensive report examines a record-setting year in which 66 individual billion-dollar economic loss events were recorded.
The 2023 economic and insured loss estimates from the reinsurance broker follows comments from Bowen in November 2023 stating that the $100 billion insured loss threshold had already been breached.
It’s worth noting that at $123 billion, Gallagher Re’s insured loss estimate is higher than Munich Re’s estimate of $95 billion for the year, and Swiss Re’s estimate of $100 billion, but in line with broker BMS Group’s December 29th estimate, which said that worldwide insured losses for 2023 should end up below the modeled average annual loss suggested by Verisk Annual Global Modeled Catastrophe Losses of $133 billion.
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