Munich Re reports that from January to June 2024, the global average temperature was approximately 1.5°C higher than pre-industrial levels, with record-breaking temperatures occurring worldwide.
The rise in temperature has led to increased losses from natural disasters, particularly in Africa, where recent events highlight the need for the insurance industry to address climate change risks.
Global losses from natural catastrophes in the first half of 2024 amounted to $120 billion, with insured losses making up about half, or $62 billion. In its report, Munich Re suggests that, based on current figures, insured losses could exceed the $100 billion mark by the end of 2024, which has become a significant point of discussion since 2023.
Munich Re attributes most of the global losses (68% of economic losses and 76% of insured losses) to severe thunderstorms, floods, and wildfires, categorized as "non-peak" perils. In Africa, natural disasters caused economic losses of $500 million in the first half of 2024.
The region’s insurance protection gap remains substantial, with penetration levels typically below 1%. According to Munich Re, floods in East Africa during March and April accounted for the most significant losses.
Munich Re's data shows that economic losses in Africa were lower in the first half of 2024 compared to previous years, but past events such as the 2023 Morocco earthquake and 2022 floods in South Africa and Nigeria caused much higher damage. In 2023, economic losses in Africa reached $14.6 billion, primarily driven by the earthquake in Morocco.
To assess preparedness for climate risks, Munich Re conducted a survey of 500 South African business representatives across various industries, including insurance, agriculture, and transportation. The survey found that 86% of participants were concerned about the economic effects of climate change on their organizations.
While the level of concern has increased over the last decade, the willingness to invest in preventive measures is still lower, though visible.
Munich Re's survey also asked homeowners about their response to increasing risks from weather-related disasters. The majority, 57%, expressed interest in expanding their insurance coverage to protect against these risks, but cost remained the primary barrier preventing them from doing so.
Looking ahead, Munich Re highlighted several key actions insurers can take to address the growing risks posed by climate change. These include improving data intelligence and portfolio steering, particularly through tools like Munich Re’s Location Risk Intelligence software, which offers climate risk analytics for thousands of locations.
Insurers are also encouraged to adjust pricing models to reflect the increased frequency and severity of natural catastrophes, as well as to promote risk mitigation efforts across the value chain.
Munich Re acknowledged that while exposure growth, such as urban development, has contributed to increased losses over time, climate change has also intensified the frequency and severity of natural disasters.
The company referenced studies, such as those from the World Weather Attribution organization, which suggest that climate change has made certain weather events, like the 2022 KwaZulu-Natal floods, more frequent.
Munich Re said that extreme weather will continue to impact society, and it is essential for insurers and other stakeholders to work together to adapt to these changes and protect people and economies from the consequences of climate-related risks.
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