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sigma 1/2024 in short

Global annual insured losses from natural catastrophes of more than USD 100 billion have become the norm. Such was the case too in 2023, the hottest year on record.

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sigma 1/2024 – Natural catastrophes in 2023
Gearing up for today's and tomorrow's weather risks

In 2023, natural catastrophes resulted in economic losses of USD 280 billion, of which 38% were covered by insurance. The earthquake in Turkey and Syria in February was the biggest humanitarian disaster of the year, claiming close to 58'000 lives. With insured losses of USD 6.2 billion, it was also the costliest event of the year for the insurance industry.

The main driver behind the accumulation of global insured losses from natural catastrophes last year was event frequency. There were 142 insured-loss inducing catastrophes last year, a new record.

Among these are severe convective storms (SCS), which is an umbrella term for a range of frequently-observed weather events, including tornadic winds, straight-line winds (derechos) and hail storms. After tropical cyclones, SCS have collectively become the second-largest loss making natural peril.

From an insurance industry perspective, the term SCS is used mainly in the context of damage caused by hail, tornadoes and derechos. The storms can also trigger damage from flooding, but these are usually considered as pluvial flood events. Similarly, insurers typically associate damage from lightning to fire losses rather than SCS.

In 2023, SCS-insured losses were USD 64 billion, a new high.

Most SCS-related insured losses originate in the US, but losses are growing fastest in Europe, where they topped USD 5 billion in each of the last three years.

Global natural catastrophe insured losses have grown at a much faster rate than the global economy over the last 30 years. In inflation-adjusted terms, on average insured losses from natural catastrophes were up 5.9% per annum in the period 1994–2023, while global GDP was up 2.7% in the same period. In other words, the insurance loss burden has more than doubled.

We expect the financial burden of losses from natural disasters will continue to rise in the years to come.

We expect the growth trend to continue at an average annual rate of 5-7% in real terms, and extrapolate that today's burden could double over the next 10 years.

Economic growth, urbanisation and the associated accumulation of assets that need insuring have been the main driver of rising losses from natural catastrophe events. So far, the impact of changing climates on losses has been small. However, we expect the contribution from severe weather and other events will likely rise.

Insurance industry assessment must keep up with a fast-evolving landscape. But insurance alone cannot do the job. To keep society resilient, adaptation actions such as enforcing building codes and strengthening flood defences, and measures to mitigate greenhouse gas emissions are critical, to reduce the size of and prevent losses from occurring in the first place.

Read more in our latest sigma.

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sigma 1/2024: Natural catastrophes in 2023

Gearing up for today's and tomorrow's weather risks.

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