Global: Rising catastrophe losses amid climate change and secondary perils
Source: Middle East Insurance Review | Oct 2024
Verisk’s 2024 global report on extreme event risk highlighted significant changes in insured losses from natural catastrophes, offering critical insights for the (re)insurance industry. The report, utilising advanced models and exceedance probability curves, reveals a sharp rise in losses and identifies the factors influencing this trend.
Over the past five years, insured losses from Nat CAT have averaged $106bn annually, up from $83bn in the previous half-decadal period. Current estimates put the expected global average annual loss (AAL) from Nat CAT at $151bn, with non-crop losses - primarily from hurricanes, wildfires and severe storms - making up over $119bn of this total.
In 2023, no single catastrophic event surpassed $10bn in losses, yet the US experienced a record-breaking severe thunderstorm season contributing more than $57bn to the year’s insured losses. Severe thunderstorms in the US have seen their adjusted AAL increase to $39bn from $23bn over the past five years, underscoring the growing frequency of non-hurricane and earthquake events.
The report also highlighted the growing role of climate change in increasing insured losses, currently contributing to approximately 1% of the annual rise. Ongoing research aims to improve understanding of how climate change affects the frequency and intensity of these events. For example, next-generation models of the Atlantic basin can provide a clearer assessment of the risk posed by hurricanes in changing climate patterns.
In addition to hurricanes and earthquakes, a range of secondary perils such as floods, wildfires and convective storms now constitute more than half of the modelled non-crop AAL. This growing threat landscape points to the need for a broader approach to catastrophe risk management, as total insured losses could surpass $151bn regularly. M