Average annual natural catastrophe losses reach US$133 billion

Average annual natural catastrophe losses reach US$133 billion – Verisk | Insurance Business America

Insurance News

Average annual natural catastrophe losses reach US$133 billion – Verisk

Three types of events account for the greatest proportion of overall losses

Insurance News

By
Jonalyn Cueto

Average insurance losses from natural catastrophes are now at around US$133 billion (approximately £106.2 billion) annually, a record high, according to new data by Verisk.

According to Verisk, the insurance industry would have to prepare for more than US$100 billion in total insured losses from natural catastrophes yearly and possible annual losses of more than US$200 billion.

The report revealed that floods, severe thunderstorms, and wildfires now account for a larger proportion of the overall losses, with severe thunderstorms accounting for 70% of insured losses. Nearly 40% of the global average annual loss (AAL) insured has been attributed to severe thunderstorms.

The global insured losses only make up approximately a quarter of global economic losses, according to Verisk, as it has estimated that economic losses could exceed US$400 billion.

The sizable difference between insured and economic losses—the protection gap—represents the cost of catastrophes to society. Verisk has estimated the global insured 1%, or 100-year loss for the year is US$370 billion.

“The growth in exposure values, driven primarily by continued construction in high-hazard areas, and rising replacement costs—largely due to inflation—are the most significant factors responsible for increasing catastrophe losses,” said Bill Churney, president of Verisk extreme event solutions.

“The other significant factor is the impact of climate change, which is often cited as the primary reason for the increase in losses. But, while this plays a role, year-over-year growth of exposure and rising replacement values have a far greater short-term impact.”