Natural disasters resulted in global economic losses of $275bn in 2022, of which $125bn were covered by insurance. Economic growth and accumulation of property assets in exposed areas were main loss drivers, aggravated by exceptional inflation pressure, said Swiss Re’s latest Sigma report.
With several Nat CAT events happening across various parts of the world, 2022 was the second consecutive year in which insured losses from natural catastrophes exceeded the $100bn mark. This reaffirms the trend of a 5–7% average annual increase in insured losses over the past three decades, said the report.
“The magnitude of losses in 2022 is not a story of exceptional natural hazards, but rather a picture of growing property exposure, accentuated by exceptional inflation,” said Swiss Re head of catastrophe perils Martin Bertogg. “While inflation may subside, increasing value concentration in areas vulnerable to natural catastrophes remains a key driver for increasing losses. For our industry this is a call both to reflect the latest exposure even more carefully in risk assessments while continuing to support society in being better prepared.”
With natural disasters continuing to wreak property damage across the world, the demand for coverage has grown. At the same time, inflation has surged over the last two years, averaging 7% in advanced economies and 9% in emerging economies in 2022. The effect of high prices has been to increase the nominal value of buildings, vehicles and other insurable assets, thus pushing up insurance claims for damage caused by natural catastrophes.
“The economic storm is not over, and interest rates will likely have to increase further given existing inflation pressure. This means higher financing costs and, as a result, capacity providers are likely to remain more cautious in deploying capital for a number of reasons, including risk assessment and loss experience. In our view, as higher exposures encounter shrinking risk appetite, momentum for rising prices, higher retentions and tighter terms and conditions will likely continue”, said Swiss Re group chief economist Jérôme Haegeli.
Insured losses were largely driven by hurricane Ian, by far the year’s costliest event with estimated insured losses of $50bn – $65bn. After hurricane Katrina in 2005, Ian ranks as the second-costliest Nat CAT insured loss event on sigma records. M