Climate change will increase losses: Swiss Re
A quiet hurricane season in the US was the biggest contributing factor to global insured losses from catastrophes totalling just $45 billion in 2013, a big decrease on the $81 billion of losses incurred by the industry in 2012, according to a report by Swiss Re.
The lower catastrophe losses in 2013 helped most reinsurers post very strong 2013 results in recent months. But Swiss Re also warned of a potentially costly shift in the frequency, intensity and duration of extreme weather events due to climate change.
The $45 billion of insured losses in 2013 represented less than a third of total economic losses from natural catastrophes and man-made disasters in 2013 which came to $140 billion, down from $196 billion in 2012 and well below the 10-year average of $190 billion. The biggest contributing events to the insured loss were hail events in Europe and flooding in many regions.
The report also noted that the protection gap continues to widen in many countries, especially emerging markets. Using the example of Cyclone Phailin, which hit India in October 2013 destroying around 100 000 homes and more than 1.3 million hectares of cropland, Kurt Karl, chief economist at Swiss Re, said the industry could do more. He noted that the protection gap, the difference between total losses and insured losses, has progressively widened over the last 40 years. Disaster events continue to generate increasing total losses alongside ongoing economic development, population growth and urbanization.
“The total economic loss of Cyclone Phailin is estimated to be $4.5 billion, with just a tiny portion covered by insurance. The insurance industry can play a much larger role in helping societies deal with the fallout of disaster events, such as this and Typhoon Haiyan,” said Karl.
Swiss Re also dedicated a special chapter in the report to the effects of climate change. The report said that rising temperatures are expected to lead to more frequent and severe extreme weather events in the future.
“If no action to reduce greenhouse gas emissions is taken, these events are likely to become an increasingly important factor in the ongoing upward trend of total losses. As this sigma report shows, along the US Gulf coast, for example, the economic loss potential of climate change may rise to $21.5 billion per annum by 2030,” the report said suggesting that a number of cost-efficient adaptation measures should be implemented, which could lower damages by 35 percent.