The reinsurer said natural catastrophes will once again break several loss records in 2023, with severe convective storms driving the numbers.
Natural catastrophes will once again break several loss records in 2023, a briefing from Swiss Re emphasised.
A high number of low-to-medium-severity events will aggregate to insured losses of more than $100bn in 2023, estimates Swiss Re Institute.
Severe convective storms (SCS) make up the brunt of these losses, the company said.
The reinsurer has estimated losses from this year’s big thunderstorms at $60bn, representing an all-time high.
High frequency of low single-digit billion-dollar events adds up to large insured losses that will exceed the $100bn-threshold for fourth consecutive year.
With $6bn of insured losses, the earthquake in Turkey and Syria was the costliest natural catastrophe year to date.
The re/insurance industry covered roughly 40% of the economic losses, estimated at $269bn in 2023, indicating a large protection gap across the world.
Swiss Re underlined that 2023 is the first year ever that SCS have caused this level of loss for the industry.
“The cumulative effect of frequent, low-loss events, along with increasing property values and repair costs, has a big impact on an insurer’s profitability over a longer period,” said Jérôme Jean Haegeli, Swiss Re’s group chief economist (pictured).
“The high frequency of severe thunderstorms in 2023 has been an earnings’ test for the primary insurance industry,” he added.
Losses from severe thunderstorms have steadily increased by 7% annually in the last 30 years.
2023 marks an increase of almost 90% compared to the previous five-year average of $32bn, and more than double the previous 10-year average of $27bn.
The US is particularly prone to SCS due to its geographical location, Swiss Re noted.
In 2023, the amount of $50bn insured losses for US SCS activity was exceeded for the first time — and it is set to keep rising. The US has experienced 18 events year to date which each caused insured losses of $1bn and above.
Similarly, Europe has seen an increase in insured losses from severe thunderstorms: Italy was the most affected in 2023 as was France the year before, the reinsurer said. Italy experienced losses of more than $3.3bn, the costliest natural catastrophe-related insured losses ever in Italy.
“For the insurance industry, recent events provide robust benchmarks for estimating the increasing loss trends,” said Balz Grollimund, head of catastrophe perils, Swiss Re.
“Nevertheless, to further progress the deeper understanding of this peril, it is important to get better insights from primary insurers on distributions of insured exposure and detailed claims data. It is equally important that insurance premiums adequately reflect the risk for the coverage provided especially also in light of increasing loss trends,” he added.