Insurers: Prepare for annual catastrophe losses of $151 billion
Verisk research indicates severe thunderstorm activity now outpaces insurer losses from hurricanes and earthquakes.
The average annual loss from global natural catastrophes is predicted to reach a record $151 billion over the next five years, with non-crop losses accounting for $119 billion of that total, according to a recent report by Verisk.
During the previous five-year period, actual annual insured losses from natural catastrophes averaged $106 billion, the data showed, as severe thunderstorm activity dominated losses rather hurricanes and earthquakes.
“While actual annual insured losses over the past five years have been high, they should not be seen as outliers,” said Rob Newbold, president of Verisk Extreme Event Solutions.
“Our models show the insurance industry should be prepared to experience total annual insured losses from natural catastrophes of $151 billion on average, and well more than that in large loss years,” he added. “With this information, (re)insurers can prepare for large loss years and truly own their risk with confidence, so they can be better positioned to manage these challenging years without risking their solvency.”
Meanwhile, insured losses were driven by a spike in non-hurricane and non-earthquake loss activity in 2023, with no single event globally exceeding $10 billion in loss. Also in 2023, the U.S. experienced a record-setting severe thunderstorm season, the data showed, with losses contributing over $57 billion to total insured losses.
While climate change is expected to increase the frequency and intensity of extreme weather events, pinpointing its role in global losses can be challenging due to natural variability and changes in exposure and inflation, according to Verisk.
“Climate change affects all atmospheric perils, but currently only accounts for approximately one percent of the annual increase in losses,” Dr. Jay Guin said, executive vice president and chief research officer for Verisk Extreme Event Solutions.
“Nonetheless, its influence is expected to become more significant over the next few decades,” he added. “This is a signal that the insurance industry needs to be proactive and utilize advanced, forward-looking models to better estimate risk and guide internal decision-making.”
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