Swiss Re highlights large protection gaps as nat cat damage hits $35bn in H1
Global insured catastrophe losses in the first half of 2022 were 22% above the ten year average of $29 billion, chiefly driven by the increasing frequency and severity of secondary perils, Swiss Re Institute’s preliminary estimates have shown.
A series of winter storms in Europe, unprecedented flooding in Australia and South Africa as well as a high number of thunderstorms in the US and Europe resulted in $35 billion of insured losses from natural catastrophes in the first half of 2022. Man-made events triggered an additional $3 billion in insured losses, bringing total catastrophe insured losses to $38 billion.
Swiss Re has warned that record-high temperatures in many parts of Europe may lead to further losses caused by droughts and wildfires. The severe weather events of the past six months once again highlight that natural catastrophes, particularly secondary perils, are increasing in frequency and severity in all regions.
Martin Bertogg (pictured), head of catastrophe perils at Swiss Re, explained: "The effects of climate change are evident in increasingly extreme weather events, such as the unprecedented floods in Australia and South Africa. This confirms the trend we have observed over the last five years, that secondary perils are driving insured losses in every corner of the world. Unlike hurricanes or earthquakes, these perils are ubiquitous and exacerbated by rapid urbanisation in particularly vulnerable areas. Given the scale of the devastation across the globe, secondary perils require the same disciplined risk assessment as primary perils such as hurricanes."
In February, a series of winter storms hit Europe and prompted estimated insured losses of $3.5 billion, bringing this key peril back on the insurance industry's agenda, Swiss Re noted. In February and March, torrential rains led to widespread flooding in Australia. It set a new record for flood losses in the country at so far close to $3.5 billion. For the insurance industry, this is one of the costliest natural catastrophes ever in the country and the costliest event globally in the first half of 2022, in terms of insured losses, according to the estimates. South Africa, India, China and Bangladesh also suffered heavy losses from floods.
In the first half of 2022, severe weather including hailstorms and heavy rain hit France, so far causing an estimated $4 billion of insured market losses, based on data from the French Federation of Insurance Companies.
Two severe summer heatwaves resulting in record-high temperatures across Europe have sparked destructive forest fires across southwest Europe. The global average temperature for June 2022 was about 0.3°C higher than the 1991-2020 average, making it the third warmest June on record. As warming climate is predicted to exacerbate droughts, the likelihood of wildfires increases, causing greater damage where rapid urban sprawl overlaps the wildland-urban interface, Swiss Re warned.
Global economic losses from natural and man-made catastrophe events are estimated at $75 billion in the first half of 2022. This is below the average of the past ten years ($80 billion).
Jérôme Jean Haegeli, Swiss Re's group chief economist said: “Climate change is one of the biggest risks our society and the global economy is facing. With 75% of all natural catastrophes still uninsured, we see large protection gaps globally exacerbated by today's cost-of-living crisis. Partnering with the public sector, the insurance industry is critical for strengthening society's resilience to climate risks, by investing in and underwriting sustainable infrastructure."
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