Mar 27, 2024 - Business

Amid record disaster losses, Swiss Re issues warning

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Illustration: Tiffany Herring/Axios

Global losses from natural catastrophes in 2023 amounted to about $280 billion, according to new data from the Swiss Re Institute.

Why it matters: The reinsurance giant's report warns that global insured disaster losses are sharply increasing, and climate change is a small but growing driver.

Driving the news: About 38%, or $108 billion, of the total were insured losses, and this category is growing rapidly, Swiss Re found.

  • During 2023, which was the planet's hottest year since the start of modern instrument data, there were a record high 142 natural catastrophe events, the company notes.
  • Losses from severe thunderstorms, including their hazards such as large hail and high winds, also set a new high, at $64 billion, and much of these costs were incurred within the U.S.
  • Overall natural disaster insured losses have increased at a faster rate than the global economy during the past three decades, the report found, and it expects this to continue.
  • The insured loss burden has more than doubled between 1994-2023, Swiss Re found, and it projects the next doubling to take place within just the next decade.

Between the lines: The summary of natural disaster losses during 2023, along with recent trends, notes that while climate change is increasingly affecting certain types of extreme weather events, such as hurricanes and extreme precipitation events, it is not the primary cause for rising costs.

  • "To date economic growth, urbanization and the associated accumulation of assets that need insuring have been the main driver of rising losses," the report states.
  • At the same time, though, Swiss Re echoes other studies in finding that climate change will play an increasingly large role in driving future costs.

When combined with other research from Swiss Re, it becomes clear this disaster loss burden will be unevenly distributed worldwide, with countries with the most at-risk assets, and greatest exposure to climate change-linked perils, likely to be hit the hardest.

  • "So far, the impact of changing climates on losses has been small. However, as climates change, the contribution of more frequent and severe weather events to losses looks set to rise in the future," the report states.

What's next: According to Swiss Re, which along with its competitors has long been sounding the alarm on climate change, it won't be enough to simply raise the costs of insurance to compensate for more loss expenses.

  • This will simply price too many people out of insurance markets, as is already being seen in Florida, Louisiana and California.
  • Instead, climate adaptation actions to reduce the impacts from extreme events are needed, the report states. So, too is reducing the severity of climate change in the first place.
  • "Yet in the face of climate change, adaptation and insurance can only go so far," the report states. "Mitigation of greenhouse gas emissions is also essential to counter the build-up of physical risks."
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