A devastating earthquake in Turkey and Syria, severe convective storms (SCS) and large-scale urban floods were the main events driving insured natural catastrophe losses to $108 billion in 2023, reaffirming the 5–7% annual growth trend in global insured natural catastrophe losses since 1994. Swiss Re Institute estimates that insured losses could double within the next ten years as temperatures rise and extreme weather events become more frequent and intense. Therefore, mitigation and adaptation measures are key to reduce natural catastrophe risk.
Global insured losses from natural catastrophes outpaced global economic growth over the past 30 years: From 1994 to 2023, inflation-adjusted insured losses from natural catastrophes averaged 5.9% per year, while global GDP grew by 2.7%. In other words, over the last 30 years, the relative loss burden compared to GDP has doubled.
Jérôme Jean Haegeli, Swiss Re’s Group Chief Economist, says: “Even without a historic storm on the scale of Hurricane Ian, which hit Florida the year before, global natural catastrophe losses in 2023 were severe. This reconfirms the 30-year loss trend that’s been driven by the accumulation of assets in regions vulnerable to natural catastrophes. In the future, however, we must consider something more: climate-related hazard intensification. Fiercer storms and bigger floods fueled by a warming planet are due to contribute more to losses. This demonstrates how urgent the need for action is, especially when taking into account structurally higher inflation that has caused post-disaster costs to soar.”
Moses Ojeisekhoba, Swiss Re’s CEO Global Clients & Solutions, says: “As weather hazards intensify due to climate change, risk assessment and insurance premiums need to keep up with the fast-evolving risk landscape. Looking ahead, we must focus on reducing the loss potential. 2023 was the hottest year on record, and the start to 2024 is following suit. Keeping property insurance sustainable and affordable requires a concerted effort by the private industry, the public sector and broader society – not just to mitigate climate risks, but to adapt to a world of more intense weather.”
Earthquake costliest disaster, SCS main loss driver in 2023
The most destructive natural catastrophe of the year was the earthquake in Turkey and Syria in February with estimated insured losses of $6.2 billion.
2023 was also marked by a high frequency of events as 142 insured natural catastrophes set a new record. Most were of medium severity, resulting in losses of $1–5 billion. There were at least 30 such events in 2023, many more than the previous ten-year average (17). Of those events, 21 were SCS, a new high. The number of these medium-severity events has grown by 7.5% since 1994, almost double the 3.9% increase in catastrophes generally.
After tropical cyclones, severe thunderstorms have become established as the second-largest loss-making peril due to exposures caused by urbanisation and economic and population growth. Hailstorms are by far the main contributor to insured losses from SCS, responsible for 50–80% of all SCS-driven insured losses. SCS is the umbrella term for a range of hazards including tornadic and straight-line winds, and large hailstones. SCS are frequently observed weather events that develop when warm humid air rises from the surface of the earth into upper layers of the troposphere, leading to the formation of towering clouds, lightning, and thunder. Meanwhile parcels of cool air rush to the earth’s surface, bringing powerful wind gusts, rain, or even hail. Global insured losses from SCS accumulated to a new record of $64 billion globally in 2023, 85% originating in the US. SCS-related insured losses were fastest-growing in Europe, exceeding $5 billion in each of the last three years. Hail risk in particular is increasing, mainly in Germany, Italy and France.
Setting premiums as incentives for adaptation measures
Increased exposures due to economic and population growth, urbanisation and wealth accumulation remain the main force behind rising SCS-related losses, and climate change-effects are likely to exacerbate the trend. Another factor is changes in exposure vulnerabilities, such as a rapid growth of solar power system installations on roof tops.
The first step to cutting losses is to reduce the loss potential through adaptation measures like enforcing building codes, building flood protection barriers, and discouraging settlement in areas prone to natural perils. Additionally, a collaboration with primary insurers, insurance associations and the public sector enables a data exchange which is key for shared risk mitigation.