The global insurance sectors’ losses from natural catastrophes are set to surpass sums of $100bn (£81.5bn) for the second year in a row, new data from Swiss Re shows.
Natural catastrophes will cost insurers an estimated $115bn this year, after Hurricane Ian and a series of “secondary perils” caused $260bn worth of damage in 2022, the Swiss Re data shows.
The Category 4 storm, which hit the densely populated southwest coast of Florida this September, is set to cost insurers between $50-65bn alone.
Hurricane Ian is set to come as the largest ever loss to insurers after Hurricane Katrina, which cost the sector $65bn in 2005.
However, an uptick in “secondary perils” – including floods, hailstorms, and wildfires – is set to increase insurers losses to $115bn, Swiss Re said.
The 2022 figure sits well above the $81bn a year average sums paid out by the global insurance sector over the previous decade.
The higher-than-average natural catastrophe losses sit in line with continuing trends that have seen insured losses increase at rates of 5-7 per cent over the past ten years.
The uptick come as a combination of climate change, inflation, and the accumulation of wealth in disaster-prone areas has increased insurers’ losses in recent years.
Swiss Re’s head of catastrophe perils Martin Bertogg noted that “when Hurricane Andrew struck 30 years ago, a $20bn loss event had never occurred before – now there have been seven such hurricanes in just the past six years.”
Higher levels of mid-sized weather events also pushed up insurers losses this year, as flooding in Australia, storms in Europe, and a series of hailstorms in France and the US, caused billions worth of damage.
Swiss Re warned the rise of “secondary perils” means insurers must begin using forward looking forecasts to predict losses.
The reinsurer explained the higher frequency of mid-sized events, paired with higher cost of damage, means it now models losses based on future trends, rather than past data.
Swiss Re’s chief underwriting officer Thierry Léger explained: “To enable the insurance industry to keep up with increasing volatility and demand, it will be key to model evolving frequency and severity trends.”
However, the underwriter warned the cost of insurance premiums will have to increase to cover the sector’s higher losses. “Pricing needs to reflect the effective risk,” Léger said.