Wildfires, US winter storms and tornadoes in Europe helped deal an estimated $40 billion (€34 billion) blow to global insurers in the first half of 2021, marking the worst start to a year for natural catastrophe insurance in a decade.
Reinsurance group Swiss Re said extreme weather caused by climate change and rapid urban development in disaster-prone areas had driven “ever higher natural catastrophe losses”. It represented the biggest insured first-half loss since earthquakes in Japan and New Zealand in 2011, and the second biggest on record for the period.
The North American winter storm Uri caused an estimated $15 billion loss for insurers, the biggest hit for such an event on record.
While Swiss Re did not forecast claims for the second half of the year, “the stage is set” for what could be record losses, according to Martin Bertogg, the group’s head of catastrophe perils. He pointed to severe floods in China and Europe in July, with the worst of the hurricane season still to come.
In Germany alone, insurers were expecting claims of €4.5 billion to €5.5 billion from last month's devastating floods. Aon, an insurance broker, said on Wednesday that this was likely "to rank as the costliest weather event and second-costliest natural disaster event in Europe in the past 40 years", after adjusting for inflation, only behind the damage from the Irpinia earthquake in Italy in 1980.
Bertogg also pointed to the rising threat of “secondary perils”, or catastrophes that did not historically have the financial impact of events such as earthquakes or hurricanes. These were now regularly reaching $1 billion in losses, he said.
Increased threat to sector
The rising costs reflect the increased threat to the insurance sector as extreme weather combines with population growth and construction that can result in less water being absorbed into the ground, for example.
Global economic losses from natural and human disasters, which include insured and uninsured damage, were $77 billion in the first half of 2021, below the 10-year average. Nearly 4,500 people lost their lives or went missing in these events, Swiss Re said.
The estimates of the financial toll follow the latest UN Intergovernmental Panel on Climate Change report charting “unequivocal” evidence of global warming as a result of human activity.
Insurers are coming under pressure from investors and campaigners to withdraw support for the most carbon-intensive activities, to help limit greenhouse gas emissions to net zero by 2050.
In July, eight European insurance groups including Axa, Aviva and Generali launched the Net-Zero Insurance Alliance, pledging to bring their insurance and reinsurance underwriting portfolios into line with the 2050 target.
“The intensity and the frequency of natural catastrophes, which are both growing, show that we are facing an absolute emergency,” Generali’s chief executive Philippe Donnet told the Financial Times last week.
On current risk modelling, the insurance sector should have the capacity over the next two decades to absorb the rising costs of natural catastrophes in general, Bertogg said, but he expected more “patches” where buying insurance cover would become uneconomical. – Copyright The Financial Times Limited 2021