Nat cat losses could climb as high as $300bn in any given year: Swiss Re

Re/insurers could face an insured loss of more than $300 billion in a single year, according to latest projections by reinsurer Swiss Re.

Key points:
2011 Japan quake would cost $300bn today
Hurricane Katrina would cost $105bn today
10-year rolling average losses climbs 46%

Extreme weather is pushing annual insured losses towards $150 billion, regardless.

Giving a presentation at Monte Carlo Rende-Vous on Monday (September 8), Swiss Re P&C reinsurance CEO Urs Baertschi said that the main drivers behind increasing natural catastrophe losses are inflation, affecting reconstruction costs and people being exposed to more extreme weather where they live.

Speaking alongside Swiss Re P&C reinsurance CEO Gianfranco Lot, Baertschi highlighted what the cost of recent nat cat events would be in today's money: the 2011 Great East Japan earthquake today would cause economic losses of $300 billion alone, while insured losses from Hurricane Katrina would cost $105 billion today.

Indeed, the 10-year rolling average for insured natural catastrophe losses increased by 46% to $108 billion last year.

“Highest tariffs since the Great Depression are fuelling uncertainty.”

Swiss Re said that the market has a history of underestimating losses, which it called an "industry-wide phenomenon" with many adjusting their ultimate losses by 100-200%. The main drivers are underestimating loss exposure, risk values and inflationary impact, said Swiss Re. And the root cause for underestimation comes down to lacking exposure data to enhance modelling and risk estimations. Inaccuracy and delay in loss reporting can lead to loss of trust and pricing volatility, Swiss Re added.

What the reinsurance industry needs is enhanced exposure data and greater transparency across the value chain to strengthen industry resilience, it pointed out.

The reinsurer also called out protectionist trade policies for driving higher costs and long-term supply chain fragmentation. Indeed, trade policies, geopolitics and protectionism are reshaping global supply chains – raising costs, amplifying uncertainty and driving long-term fragmentation risks.

“Highest tariffs since the Great Depression are fuelling uncertainty,” the reinsurer warned.

And, in a week which large parts of France shuts down because of a national protest against president Emmanuel Macron, Swiss Re warned that with strikes, riots and civil commotions (SRCC) exposure on the rise, disciplined accumulation management is essential. Populist movements and anti-establishment sentiment is rising globally, the reinsurer said, even in historically stable markets. More than 75 countries have experienced significant protests in the past 12 months, while 50% of young adults support hostile activism for social change.

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