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The insurance industry has experienced $50bn in losses from natural catastrophes in the first half of this year, marking the worst start to a year since 2011. These losses highlight the sector’s vulnerability to global warming and the challenges it faces. A study by Swiss Re, a leading reinsurance group, reveals that climate change, along with the expansion of urban areas and the rising cost of insuring them, contributed to these losses.
Jérôme Jean Haegeli, the chief economist of Swiss Re, emphasizes the impact of climate change on perils such as heatwaves, droughts, floods, and extreme precipitation. He asserts that investing in climate adaptation is essential to ensure insurance remains affordable for properties located in high-risk areas.
The study also shows that convective storms, characterized by heavy rain, strong winds, and temperature changes, accounted for more than two-thirds of the losses in the first half of the year. Swiss Re states that these storms have become one of the major drivers of insurance claims globally, with $35bn in losses during the six months leading up to June.
The rising cost of natural catastrophes, combined with inflation in material and labor costs, has prompted reinsurers to demand higher prices for coverage. Hiscox, an FTSE 100 insurer, reported a 43% increase in natural catastrophe reinsurance prices in North America. This price surge has put pressure on direct insurers, such as State Farm, leading them to halt writing homeowners insurance for new customers in California.
Christian Mumenthaler, the CEO of Swiss Re, emphasizes the need for pricing signals to reflect the societal impact of climate change. Swiss Re increased prices for property and catastrophe reinsurance by 20% at the July renewals, aligning them with the economic viability of the system.
The first half of this year saw overall economic losses from natural catastrophes, including uninsured losses, reach $120bn—40% higher than the average of the past decade. The rise in global temperatures, as confirmed by the UN Intergovernmental Panel on Climate Change, has led to more frequent and extreme weather events.
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