Global insured losses from natural catastrophes last year surpassed $100 billion for the fourth consecutive year in a row, according to Swiss Re Institute. “A devastating earthquake in Turkey and Syria, severe convective storms (SCS), and large-scale urban floods were the main events driving insured natural catastrophe losses…in 2023, reaffirming the 5% to 7% annual growth trend in global insured natural catastrophe losses since 1994,” according to Swiss Re. A total of 142 events contributed toward the total cost.
Swiss Re reports that “global insured losses from natural catastrophes outpaced global economic growth over the past 30 years: From 1994 to 2023, inflation-adjusted insured losses from natural catastrophes averaged 5.9% per year, while global GDP grew by 2.7%. In other words, over the last 30 years, the relative loss burden compared to GDP has doubled.”
Main Drivers
“The most destructive natural catastrophe of the year was the earthquake in Turkey in Syria in February, with estimated insured losses of $6.2 billion,” states Swiss Re. Furthermore, “Most [events] were of medium severity, resulting in losses of $1 billion to $5 billion. There were at least 30 such events in 2023, many more than the previous 10-year average (17). Of those events, 21 were SCS, a new high. The number of these medium-severity events has grown by 7.5% since 1994, almost double the 3.9% increase in catastrophes generally.”
Swiss Re notes that, after tropical cyclones, severe thunderstorms are “the second-largest loss-making peril due to exposures caused by [urbanization] and economic and population growth.” According to the report, “Hailstorms are by far the main contributor to insured losses from SCS, responsible for 50% to 80% of all SCS-driven insured losses…. Global insured losses from SCS accumulated to a new record of $64 billion globally in 2023, 85% originating in the U.S. SCS-related insured losses were fastest-growing in Europe, exceeding $5 billion in each of the last three years. Hail risk in particular is increasing, mainly in Germany, Italy, and France,”
Experts Weigh In
CLM member William W. Pollock, partner, Ragsdale Liggett PLLC, says, “The findings of this report are not surprising, and mirror what I see in construction-defect litigation. Many of the suits we are defending, particularly in coastal areas or in new housing developments, result from an unexpected natural disaster such as a hurricane or flooding in areas that had never experienced elevated water levels. Buildings are being subjected to more rain and moisture than was historically expected, and current building codes and methods sometimes are not enough to prevent these extreme weather events, particularly for residential housings,” he concludes.
"Climate risk has only escalated in scope and value and will continue,” states John Peiserich, senior vice president, environmental health & safety, J.S. Held. “Net-zero initiatives can deescalate climate risk when those initiatives are properly implemented. However, the bulk power systems that provide electricity across North America are rapidly becoming more interconnected and interdependent because of the rapid decarbonization of the electric generating units. Planning associated with decarbonization is becoming more and more complex due to grid resilience and reliability challenges, which opens even more concerns about natural catastrophes."
Cutting Losses
The Swiss Re report states, “The first step to cutting losses is to reduce the loss potential through adaptation measures like enforcing building codes, building flood protection barriers, and discouraging settlement in areas prone to natural perils. Additionally, a collaboration with primary insurers, insurance associations, and the public sector enables a data exchange, which is key for shared risk mitigation.”