Reinsurance broker Gallagher Re has published its view of 2022’s global natural catastrophe activity and it estimates insured losses from these events aggregate to a cost of $140 billion for the industry.
It’s actually the highest of the estimates seen so far, which can be compared to Aon’s $132 billion, Munich Re’s $120 billion, as well as Swiss Re’s estimate of $115 billion given before the end of last year.
Gallagher Re says that a complex year of natural hazard events in 2022 drove direct economic losses of US $360 billion.
With $140 billion covered by the global insurance and reinsurance industry, it makes 2022 the fifth year since 2017 to see losses surpass the $100 billion mark.
The private insurance industry covered US $125 billion of those losses, while public insurance entities covered the remaining US $15 billion.
Steve Bowen, Chief Science Officer at Gallagher Re, commented, “The financial cost of natural hazards continues to increase, and we are further recognizing that a consistently high global protection gap – 61% in 2022 – means that much more opportunity exists to help people prepare before and after a disaster occurs.
“As catastrophe losses grow more expensive, we again look to the connected nature of climate change, exposure growth, and social inflation as important issues enhancing eventual loss costs.
“The increase in severity, and in some cases the frequency of “secondary” peril events, presents (re)insurers with a multi-faceted and complicated challenge when it comes to risk protection and mitigation.
“How we collectively bring together financial institutions (insurance, asset managers, real estate, banking), governmental entities, academia, and emergency management to identify risk will be critical as we implement actionable plans to improve our resilience, mitigation and adaptation-readiness.
“Such action will result in favorable impacts when trying to slow the rate of annual catastrophe loss growth.”
Interestingly, given the tightening of reinsurance terms towards named peak peril coverage, in 2022, primary catastrophe perils drove $67 billion of the insured loss total, but so-called secondary perils drove slightly more at $73 billion.
Severe convective storms drove significant impacts in 2022, a peril of increasing relevance in reinsurance and insurance-linked securities (ILS) circles.
Insured losses from severe convective storms (SCS) reached $39 billion globally in 2022, according to Gallagher Re data, topping $10 billion for the fifteenth consecutive year, and it was the eighth year since 2010 where they have topped $20 billion.
Tropical cyclones drove $59 billion of the insured loss tally, while drought was third most costly peril with $15 billion.
Bowen concluded, “The fingerprints of climate change were visible on virtually every major weather and climate event in 2022, once again highlighting the urgency to implement proper planning and investment strategies that will limit the risk to life and property. The implications of climate change on daily weather and climate events continues to be more evident and better understood. While we are still trying to account for uncertainties that exist in how climate change may influence events on a regional and per peril basis, it is clear that impacts from the phenomenon are not future tense. They are already being felt today.”