"The rise in exposure values and replacement costs has been the most significant factor driving increased catastrophe losses over the past few years," said Bill Churney, president of Verisk Extreme Event Solutions. "Both are represented by ongoing construction in high-risk areas, as well as high levels of inflation driving up repair and rebuild costs." As a result, insurers must regularly reassess their exposures, particularly in the most vulnerable urban and coastal areas. Updating the property replacement values used in disaster modeling and other processes contributes to a more informed risk assessment."
It is also necessary to take into account the uncertainty and natural variability associated with global disaster losses. The current 5-year period of actual loss follows a 10-year period of lower levels of loss highlighted by fewer loss-causing hurricanes in the Atlantic basin. Far larger years of insured losses are possible and likely in today's climatic conditions, and while climate change is contributing to increased catastrophe losses, it is doing so to a lesser extent than the increase in the number and value of exposed properties.
Verisk's models predict a more than 40% chance of a 5-year average loss in excess of $100 billion, implying that the last five years should not be viewed as out of the ordinary. Furthermore, Verisk's models predict that there is a 50% chance of a single year in the next decade with insured losses in excess of $200 billion.
"All disasters, whether a single major event, a collection of smaller ones, or a combination of the two, can contribute to losses." "As demonstrated by this report, Verisk models effectively capture the scale of recent losses while also indicating the possibility of years of more extreme losses," said Dr. Jayanta Guin, executive vice president and chief research officer of Verisk Extreme Event Solutions. "We continue to invest in catastrophe models that provide a global and comprehensive view of today's complex risk landscape and the near-term climate."
The Global Modeled Catastrophe Losses report 2022 is based on Verisk's most recent suite of catastrophe models, including updates released in 2022 and updated industry exposure databases (IEDs) around the world.