Gallagher Re has delivered a verdict on the financial impact of natural catastrophes in the first quarter of 2024, with the reinsurance broker calling the costs “manageable” for both federal governments and the insurance industry.
According to the reinsurance broker’s report, the economic loss from all natural perils during this period amounted to a minimum of $43 billion, which is 17% below the average for the past decade’s first quarters ($52 billion). The insured losses were reported at a minimum of $20 billion, exceeding the decade’s average by 10% ($18 billion).
This year’s first quarter losses were also significantly lower compared to the same period in 2023, which saw economic losses of $108 billion and insured losses of $33 billion.
Gallagher Re explained, however, that first quarter losses typically develop further throughout the year, particularly affecting agriculture due to weather-related impacts on planting and harvests.
When isolating weather and climate-related disasters, excluding geological events like earthquakes and volcanoes, the economic cost was at least $31 billion — below the 10-year average of $43 billion. Insurance coverage for these events matched the decadal average at $17 billion.
For context, in the first quarter of 2023, the economic and insured costs for similar events were $61 billion and $26 billion, respectively.
The unpredictability of catastrophe losses in the first quarter does not generally set a trend for the remainder of the year. However, the Northern Hemisphere’s upcoming spring and summer months typically usher in a period of heightened weather activity, including severe storms and potential hurricanes in the United States, which leads the world in insurance claims for such events.
Significant attention is being directed towards the rapid transition from El Niño to La Niña conditions in the central and eastern Pacific, which is expected to influence a possibly active Atlantic hurricane season.
Gallagher Re noted that the industry is closely monitoring the potential for increased US landfall, which would significantly impact the market. La Niña could also contribute to extreme weather conditions globally.
In terms of individual events, the largest was a magnitude-7.5 earthquake in Japan’s Noto Peninsula on January 1, which resulted in approximately $12 billion in economic losses, making up 28% of the global total for the quarter. Other significant events included $7 billion in climate-related disasters in the US, such as severe convective storms, winter weather, and flooding.
Overall, severe convective storms were the costliest peril, accounting for 34% of the quarter’s economic losses at $15 billion, which is 63% higher than the decadal average for the first quarter. The ongoing decline in global inflation rates has somewhat mitigated the impact on disaster costs compared to the spikes seen in 2022 and 2023.
Regionally, the US accounted for at least $21 billion, or 49%, of economic disaster costs during the quarter, in line with the decadal average, but expected to increase. Asia, particularly affected by the Noto Peninsula earthquake, saw economic losses of at least $17 billion, significantly above its 10-year average of $8 billion. Other regions, including Europe, Oceania, and Latin America, reported losses well below their recent averages.
As Q1 historically accounts for only 14% of annual global economic losses from all perils, Gallagher explained that it is a relatively minor contributor to yearly figures. However, significant geological events in the quarter have historically resulted in substantial market impacts, illustrating the unpredictable and significant potential of natural catastrophes.
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