The annual Natural Catastrophe and Climate Report by Gallagher Re has revealed that global insured losses from natural catastrophes reached an estimated $123 billion in 2023, marking the fourth consecutive year where such losses exceeded $100 billion.
The report estimates the global economic cost of all natural perils at $357 billion in 2023, making it the eighth straight year that global losses have surpassed $300 billion. Focusing specifically on climate and weather events, excluding earthquakes and other non-atmospheric-driven events, insured losses were estimated at $116 billion, with the economic costs reaching approximately $301 billion.
The report also noted that private insurers accounted for $110 billion of these losses, while public insurance entities covered the remaining $13 billion.
Steve Bowen, chief science officer at Gallagher Re, commented on the increasing severity and frequency of natural catastrophe events, emphasizing the growing complexity of challenges faced by the insurance and reinsurance industry and highlighting the need for a blend of current risk assessment with future implications.
In 2023, severe convective storms (SCS) were the primary driver of insured losses, accounting for an estimated 58%, or a record-setting $71 billion. The United States alone faced $60 billion in losses, with six of the top 10 costliest insured events being SCS events in the US.
“‘Peak’ perils are still anticipated to drive the highest individual event losses,” Bowen said. “However, the continued growth of damage from ‘non-peak/secondary’ perils, such as SCS, is changing the way we view and plan for natural catastrophe risk. It also increases the importance of analytics and catastrophe modeling to properly gauge how a combination of climate change-influenced event behavior and socioeconomic parameters are leading to higher loss potentials.”
The report also highlighted the significant protection gap in global insurance coverage. The February earthquake sequence in Turkey and Syria was the costliest event on an economic basis, with estimated losses of $46.2 billion, but insurance only covered $6.1 billion. This event contributed to a 66% worldwide protection gap – the portion of economic costs not covered by insurance.
Other major events contributing to the protection gap included earthquakes in Morocco, Typhoon Doksuri in China, and Hurricane Otis in Mexico.
Bowen stressed the need for expanded insurance protection in vulnerable regions and the critical role of guaranteed climate or natural catastrophe financing.
“The need for more guaranteed climate or natural catastrophe financing to mitigate or adapt to a more complex world of natural hazards becomes more critical by the day. The growth of private and public sector partnerships bringing new insurance options to underserved communities is a promising trend that needs to further accelerate,” Bowen said.
The report also highlighted several record-setting events in 2023:
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