Verisk: Severe thunderstorms, wildfires no longer ‘attritional perils’
Verisk reports that severe thunderstorms have accounted for more than 70% of insured losses in 2023 so far.
From 2018 to 2022, actual insured losses from natural catastrophes topped $100 billion per year – a significant increase from the $70 billion annual average for the previous five years (2013 to 2017). While this is already a staggering figure, the 2023 Global Modeled Catastrophe Losses Report from Verisk advises the insurance industry to prepare for the possibility that some years may see much greater losses yet; with their calculations stating there is a 5% probability of experiencing global losses over $238 billion each year.
It’s not just traditionally costly hurricanes and earthquakes contributing to these inflated losses, either. According to Verisk, events like flooding, severe weather and wildfire now account for the greatest portion of overall losses, which the report largely attributes to a combination of more frequent events of this nature and more expensive properties being at risk of these disasters.
“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,” Bill Churney, president of Verisk extreme event solutions, said in a release. “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.”
Things like severe thunderstorms and wildfires that were once considered “attritional perils” have emerged as strong drivers of climate loss over the last five years. In fact, the report states that severe thunderstorms have accounted for more than 70% of insured losses in 2023 so far. Verisk says climate change has been a primary driver of these natural disasters, and has impacted all perils to varying degrees.
The report states: “From a scientific point of view, we have higher levels of confidence in perils that are directly tied to changes in temperature and the hydrological cycle of a region. Therefore, perils like floods, droughts, wildfire, and sea level rise (and therefore storm surge) are becoming more severe and the observational data corroborates the science. For other perils, the contribution of climate change is harder to quantify, especially on shorter time scales.”
Verisk notes 2023 is on track to become the hottest year on record, and ocean temperatures have already reached their highest recorded level. Higher ocean temperatures combined with El Niño conditions will also lead to higher instances of extreme weather this year.
Globally, Verisk found insured losses only account for about a third of global economic losses, and estimates total global economic losses could surpass $400 billion.