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Wildfires, winter storms in the United States, and tornadoes in Europe caused approximately US$40 billion in losses to global insurance companies in the first half of 2021. This was the worst start of natural catastrophe insurance in a decade.
Reinsurance group Swiss Re stated that extreme weather caused by climate change and rapid urban development in disaster-prone areas has led to “increasing losses from natural disasters.” This is the largest first-half insurance loss since the earthquakes in Japan and New Zealand in 2011, and the second largest loss on record during that period.
The North American winter storm Uri caused approximately US$15 billion in losses to insurance companies, which is the largest loss ever suffered by such incidents.
Martin Bertogg, head of catastrophe risk at Swiss Re, said that although Swiss Re did not predict claims in the second half of this year, record losses are “ready”. He pointed out that severe flooding occurred in China and Europe in July, and the worst period of the hurricane season is still to come.
In Germany alone, insurance companies expect to claim between 4.5 billion and 5.5 billion euros from the devastating flood last month. Insurance broker Aon said on Wednesday that after adjusting for inflation, this could “be the worst weather event and the second worst natural disaster event in Europe in the past 40 years”, second only to Irpini. Losses caused by the sub-earthquake. In 1980 in Italy.
Bertog also pointed out that there is an increasing threat of “secondary disasters” or disasters that have no financial impact caused by events such as earthquakes or hurricanes in history. He said that these losses now often reach $1 billion.
Rising costs reflect the increased threats facing the insurance industry, as extreme weather combined with population growth and construction can lead to a decrease in water absorption underground.
In the first half of 2021, the global economic losses (including insured and uninsured losses) caused by natural and man-made disasters were USD 77 billion, which was lower than the 10-year average. Swiss Re claims that nearly 4,500 people were killed or missing in these incidents.
Estimates of financial losses follow the latest United Nations Intergovernmental Panel on Climate Change The report draws “clear” evidence that human activities cause global warming.
Insurance companies are facing pressure from investors and activists to withdraw support for the most carbon-intensive activities to help limit greenhouse gas emissions to net zero by 2050.
In July, 8 European insurance groups including AXA, Aviva, and Zhongli launched Net Zero Insurance Alliance, Committed to aligning its insurance and reinsurance underwriting portfolio with the 2050 target.
“The intensity and frequency of natural disasters are increasing, which shows that we are facing an absolute emergency,” Zhongli Group CEO Philip Downey told the Financial Times last week.
Bertogg said that according to the current risk model, the insurance industry should be able to absorb the rising costs of natural disasters in the next 20 years, but he expects more “patches” to make it uneconomical to buy insurance.