Hurricane Ian and other extreme weather events such as the winter storms in Europe, flooding in Australia and South Africa as well as hailstorms in France and in the US have resulted in an estimated $115bn of Nat CAT insured losses in 2022, according to SRI.
Last year was the second consecutive year in which the estimated insured losses total more than $100bn, continuing the trend of a 5–7% average annual increase over the past decade. The (re)insurance industry covered roughly 45% of the economic losses last year, indicating a large protection gap across the world.
Swiss Re group chief underwriting officer Thierry Léger said, “2022 has been another year of increased Nat CAT loss activity, and demand for insurance is growing as the protection gap remains vast. To enable the insurance industry to keep up with increasing volatility and demand, it will be key to model evolving frequency and severity trends. Pricing needs to reflect the effective risk.”
Hurricane Ian was last year’s costliest natural catastrophe with estimated preliminary insured losses of $50–65bn. The category 4 hurricane made landfall in western Florida in late September 2022 with extreme winds, torrential rain and storm surge. SRI estimated it to be the second-costliest insured loss ever on sigma records after Hurricane Katrina in 2005. This highlights the threat potential of a single hurricane hitting a densely populated coastline, in an otherwise benign hurricane year. Furthermore, in February, a series of winter storms hit Europe and prompted estimated insured losses of over $3.7bn, bringing this peril back on the insurance industry’s agenda.
The past year also confirms the importance of secondary perils: In February and March, torrential rains led to widespread flooding in Australia that, at a currently estimated $4bn, is the country’s costliest-ever Nat CAT. Next to numerous small to medium-sized hail- and thunderstorms in the US, France experienced the most severe series of hailstorms ever observed, with insured market losses reaching an estimated EUR5bn ($5.3bn), according to Swiss Re Institute (SRI).
Swiss Re head of catastrophe perils Martin Bertogg said, “Extreme weather events have led to high insured losses in 2022, underpinning a risk on the rise and unfolding on every continent. Urban development, wealth accumulation in disaster-prone areas, inflation and climate change are key factors at play, turning extreme weather into ever rising natural catastrophe losses. 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.”
The insurance industry is managing natural catastrophe risk, building on state-of-the-art simulation-based modelling for many perils. However, the 2022 loss experience, compounded by the previous five years, has emphasised a need to adopt a more forward-looking approach for all perils. Models and data availability need to be upscaled for secondary perils such as flood and hail particularly, as they are on the rise but still receive less industry attention. M