In the first half of the year, the insurance industry faced significant challenges due to natural catastrophes, resulting in global insured losses of $50 billion. This figure is the second-highest since 2011, indicating the increasing cost of extreme weather events.
Insurance Companies and Reinsurers Grapple with Losses
Insurance companies and reinsurers, which provide insurance to insurers, are grappling with the steep losses from natural disasters. Years of catastrophic losses have prompted insurance companies to raise rates, restrict coverage, or even withdraw from certain areas. As a result, homeowners now face higher costs for insurance.
Severe Convective Storms Account for Majority of Losses
According to a recent report by reinsurer Swiss Re, severe convective storms played a significant role in this year’s insured natural catastrophe losses in the United States, accounting for 68% of the total. These storms, along with winter storms and wildfires, exemplify the escalating costs associated with secondary perils.
Earthquake in Türkiye and Syria Causes Highest Losses
Swiss Re highlighted that the earthquake in Türkiye and Syria in February was the costliest disaster in terms of economic and insured losses. Globally, economic losses from natural disasters reached $120 billion, compared to $123 billion in the previous year. This amount was 46% higher than the 10-year average.
Insured Losses Driven by Climate Change and Urbanization
Martin Bertogg, head of catastrophe perils at Swiss Re, noted that the above-average losses reaffirm an annual growth trend of 5% to 7% in insured losses. This trend is primarily driven by a warming climate but also by rapidly increasing economic values in urbanized areas worldwide.
The Impact of Climate Change on Severe Weather Events
As the global population continues to migrate towards disaster-prone areas, such as the Florida coast and California, the costs associated with recovering from natural disasters are on the rise. This is due to the increased population density and urbanization in these regions.
According to Swiss Re, severe convective storms, which encompass thunder, lightning, heavy rain, hail, strong winds, and sudden temperature changes, accounted for over two-thirds of insured losses worldwide in the first half of the year, amounting to a staggering $35 billion.
The frequency and intensity of severe weather events are increasing. Just recently, a powerful storm system ravaged the eastern United States, resulting in the loss of lives, thousands of disrupted flights, and widespread power outages.
Jérôme Jean Haegeli, Swiss Re’s group chief economist, believes that climate change is directly responsible for the rise in severe weather events such as heatwaves, droughts, floods, and extreme precipitation.
In July of this year, the planet experienced its hottest month on record, surpassing the previous global monthly average temperature record set in July 2019. This information comes from data provided by the Copernicus Climate Change Service (C3S). The scorching temperatures followed the hottest June on record and a string of extreme weather events worldwide. These included heatwaves in Europe, North America, and Asia, as well as devastating wildfires in Canada and Greece.
It is crucial that we address these climate change-related challenges and find sustainable solutions to mitigate their impact.