For the fourth consecutive year, global insured losses due to severe weather and natural catastrophes will exceed $100 billion, with thunderstorms being the main contributor for the first time in history, according to estimates by the Swiss Re Institute. Overall, the costs of a high number of small- and medium-severity natural events have accumulated to losses reaching the stunning total over 2023.
Global Thunderstorms and Loss
Losses from severe thunderstorms (severe convective storms, or SCS) alone will reach a record-breaking $60 billion, the report estimates. Over the last 30 years, these losses have increased by 7% annually; however, “2023 marks an increase of almost 90% compared to the previous five-year average, and more than doubles the previous 10-year average ($27 billion),” according to the report.
The report states that the geographical location of the U.S. makes it particularly prone to severe thunderstorms. To date, the U.S. has 18 SCS events, each of which cost $1 billion or more in insurance losses. Europe, however, has also seen a sharp increase in losses from SCS events. The report states, “Italy was the most affected in 2023, as was France the year before. Italy experienced losses of more than $3.3 billion, the costliest natural catastrophe-related insured losses ever in Italy.”
Balz Grollimund, head, catastrophe perils, Swiss Re Institute, said, “For the insurance industry, recent events provide robust benchmarks for estimating the increasing loss trends. Nevertheless, to further progress the deeper understanding of this peril, it is important to get better insights from primary insurers on distributions of insured exposure and detailed claims data. It is equally important that insurance premiums adequately reflect the risk for the coverage provided especially also in light of increasing loss trends.”
Other Catastrophic Events and Losses
The costliest natural catastrophe of the year to date was the devastating earthquake in Turkey and Syria, which resulted in $6 billion in insured losses. Furthermore, the Morocco earthquake was the strongest to hit the country since 1900, showing that “rural areas are not immune to large-scale losses and need to be included in preventative efforts to improve resilience,” according to Swiss Re Institute.
As far as hurricanes, losses from the North Atlantic season are below average in 2023 to date. Hurricane Otis, however, will likely be the costliest insured event in Mexico this year.
The report also notes, “In New Zealand, floods and cyclones caused the costliest weather-related insured losses ever for the country ($2.4 billion), while the wildfires on Maui are estimated to become the costliest insured loss event ever for the state of Hawaii ($3.5 billion).
The rise in cost of natural catastrophe insured losses across the globe, the report states, is due to urban development, wealth accumulation in disaster-prone areas, and inflation. The cause of the rise in natural catastrophes in general is due to climate change driving rising temperatures, severe droughts, wildfires, and extreme weather. “With 2023 expected to be the warmest year on record, the effects of climate change are becoming apparent,” states the report.