Swiss Re has reported that natural disasters resulted global economic losses of $275bn in 2022, of which $125 billion were covered by insurance, reaffirming a trend of 5-7% annual increases.
With Hurricane Ian in Florida, record breaking losses from hailstorms in France, floods in Australia and South Africa, winter storms in Europe and the US as well as droughts in Europe, China and the Americas, Swiss Re said 2022 was the second consecutive year in which insured losses from natural catastrophes exceeded the $100bn mark.
This reaffirms the trend of a 5–7% average annual increase in insured losses over the past three decades, according to the report.
With natural disasters continuing to wreak property damage across the world, the demand for coverage has grown. At the same time, inflation has surged over the last two years, averaging 7% in advanced economies and 9% in emerging economies in 2022.
The effect of high prices, Swiss Re explained, has been to increase the nominal value of buildings, vehicles and other insurable assets, thus pushing up insurance claims for damage caused by natural disasters.
Insured losses were largely driven by Hurricane Ian, by far the year’s costliest event. Making landfall in Florida in September as a category 4 storm, Ian resulted in estimated insured losses of USD 50–65 billion. After Hurricane Katrina in 2005, Ian ranks as the second-costliest natural catastrophe insured loss event on Swiss Re’s records.
Jérôme Jean Haegeli, Swiss Re’s group chief economist, said, “The economic storm is not over, and interest rates will likely have to increase further given existing inflation pressure. This means higher financing costs and, as a result, capacity providers are likely to remain more cautious in deploying capital for a number of reasons, including risk assessment and loss experience.
“In our view, as higher exposures encounter shrinking risk appetite, momentum for rising prices, higher retentions and tighter terms and conditions will likely continue.”
Earlier this year, FinTech Global spoke to industry executives about the role parametric insurance has to play in coping with climate change related extreme weather events and natural disasters.
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