$50 billion insured loss due to natural disasters in first half of the year: Swiss Re

According to a report by renowned reinsurer Swiss Re, insured losses due to natural calamities soared to $50 billion during the first half of 2023, the second highest recorded figure since 2011.

The rise in these losses during the first half of the year can be attributed to a multifaceted interplay of factors. Climate change, exerting its influence through an increased incidence of severe weather events, remains a major contributor.

The expansion of the urban landscape and the subsequent increase in the cost of insuring these growing areas have also been identified as important driving forces behind these rising losses. This important insight stems from an influential study by Swiss Re, which sheds light on the complex dynamics driving this volatile trend.

Comparing the $35 billion loss caused by these catastrophic events in the six-month period ending June, it is clear that this figure stands in stark contrast with the annual average of $18 billion seen over the past decade. Notable among these events were the devastating floods that affected both New Zealand and Europe, with cumulative effects reaching the range of $50 billion.

In a worrying revelation, the United States alone witnessed the storm causing an unprecedented $34 billion in insured losses, setting a new record for the six-month time frame. Meanwhile, the states of Florida and California were hit by extreme weather, causing some insurers to halt sales operations in those areas.

Wind-related incidents took center stage, dominating the landscape of natural disaster events within the United States. An analysis presented in the Morningstar report suggested that the collective power of tornadoes and hurricanes contributed to nearly 70% of total securities issuances in the first half of 2023.

With the cost of insuring against natural disasters reaching new highs, underwriters responded by issuing an unprecedented amount of insurance-linked securities in the first half of the year. Among these financial instruments, catastrophe (CAT) bonds emerged prominently, providing protection to issuers in the event of predetermined disasters.

Renowned investment institutions such as French asset manager Amundi (AMUN.PA), Zurich-based GAM Group, Britain’s Schroders (SDR.L), and Switzerland’s Twelve Capital have established themselves as notable players in this emerging market.

A growing concern globally, the rise in global temperature, as established by the United Nations Intergovernmental Panel on Climate Change, has reached the worrying milestone of at least 1.1 °C since the pre-industrial era . The widespread effects of the partial increase in warming have been conclusively linked to an increase in the frequency and intensity of extreme weather events, underscoring the urgent need for concerted efforts to address and mitigate these growing challenges.