Annual insured losses from natural catastrophes are on track to surpass $100 billion in 2023, becoming the sixth year since 2017 to exceed this figure, according to Gallagher Re’s Q3 Natural Catastrophe Report.
Record-setting weather/climate events and extreme temperatures have elevated natural catastrophe losses for the globe this year. Total economic losses from January-September were estimated at $290 billion and insured losses rose to $93 billion.
According to the report, the United States accounted for 74% of all global insured losses through September, including 23 of 29 one-billion-dollar natural disaster insured loss events.
Of the 52 $1 billion global natural disaster economic events, more than half (28) were from the US alone, the report noted.
Severe convective storm (SCS) ,continues to be the costliest peril, consisting of two-thirds ($60 billion) of all losses. The vast majority of these losses were attributed to US SCS events with over $54 billion in preliminary insured losses – marking the first time US SCS surpassed the $50 billion threshold. Major SCS events were also seen in Europe, analysts also noted.
The first three quarters of 2023 also experienced elevated global tropical cyclone activity across the Atlantic and Pacific Ocean basins, including Hurricane Idalia (US), Typhoon Haikui (China), and Hurricane Hilary (Mexico).
“Secondary perils such as SCS are driving up loss costs to new heights for primary insurance carriers. Emerging research is beginning to coalesce around the reality of more environmentally conducive days for large SCS outbreaks,” analysts stated.
“More climate-fueled intense outbreaks affecting expanding population centers will lead to higher costs, and such trends are significant, as gaining access to aggregate cover schemes from reinsurers grows more expensive and difficult to obtain.”
El Niño and continued influence of climate change led to notable flooding such as Storm Daniel in Libya; drought conditions in South America, and wildfires in Canada.
Additionally, the monthly average global temperatures shattered numerous records during the boreal (Northern Hemisphere) late spring and summer months. In the Southern Hemisphere, Australia and several countries in South America recorded their hottest winter seasons.
Landfalling tropical cyclone events are typically the drivers of high industry loss years. This year global activity through Q3 has been running at or above normal in the Northern Hemisphere, and global tropical cyclone activity was elevated across the Atlantic and Pacific Ocean basins.
“Given the very warm waters in the Gulf of Mexico and Caribbean Sea there needs to be close attention paid to these areas for late season activity” analysts warned.
Steve Bowen, Chief Science Officer, Gallagher Re, said: “We’ve reached the point where annual insured losses topping $100 billion should be assumed as a new normal, and 2023 is on track to again surpass this total.
“The ongoing effects from a strengthening El Niño have been supercharged by the ongoing influence from climate change. 2023 has been a year marked by a plethora of new natural catastrophe records, financial losses for various perils, or highly anomalous weather and climate phenomena.”
The report also pointed out that the $197 billion (68%) insurance protection gap highlights how much opportunity exists to better prepare global citizens for natural catastrophe risk.
While this is most urgent in countries with emerging and developing economies, there are large gaps which exist in even the most mature insurance markets with individual perils, analysts also noted.
Bowen said: “The insurance industry has an important role to play in the climate change conversation but a collaborative approach with other public and private sector entities must be achieved.
“It remains paramount to promote further investment to protect the most vulnerable nations facing accelerated climate or natural peril risk, including more insurance frameworks to lower the wide protection gap and the construction of infrastructure capable of withstanding the climate impacts of today and tomorrow.”
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