Global insurance and reinsurance market losses due to natural catastrophes have already exceeded $100 billion in 2023, making it the sixth year since 2017 that this level of natural catastrophe insured losses has been reached, according to Steve Bowen, scientific director of Gallagher Re.
Secondary risks have had a significant impact on insurance markets again this year, with Bowen data estimating that 81% of insured catastrophe losses, now in excess of $100 billion, came from these risks.
On Linkedin, Bowen said: “We continue to believe that $100 billion years of insured losses becomes the benchmark going forward. »
“Perhaps the most exciting part of 2023 so far is that we’ve reached over $100 billion, almost entirely through high-frequency, low-dollar ‘secondary’ events, versus ‘secondary’ events. “low-frequency, higher-dollar primaries,” Bowen added. “In fact, this is one of the rare years we’ve reached over $100 billion without a major ‘primary’ event generating loss costs.
Losses from severe convective storms (SCS) in the United States continue to be the largest contributor to the global bill, at $56 billion through the start of November, Bowen said.
He said it was actually not surprising that secondary perils accounted for the bulk of losses, since since 2000, only three years, 2004, 2005 and 2017, have seen perils primary causes of the majority of insured losses in the event of a catastrophe.
Other years have all seen secondary perils being the largest contributor to losses in the insurance and reinsurance market, as shown in the data below, shared by Bowen.
Bowen highlighted: “This is an important point as we head into the next reinsurance renewal cycles. As insurance companies continue to see increasing losses from off-peak risks, this will lead to more creative ways to access greater reinsurance protection.
The insurance industry needs frequency and global reinsurance solutions to help cover more of the risks it now faces due to higher foreclosures and stricter coverage requirements.
But the industry will also need to be prepared to pay the price for this coverage, as reinsurers and ILS funds remain focused on maintaining acceptable returns for their investors.
Bowen also said: “We can look at reasons such as more damaging events influenced by climate change, annual volatility of extreme weather and natural disasters, greater volume of exposed assets, higher replacement costs , inflation and increasing insurance penetration to explain why losses are likely. continue to increase. It should no longer be just a surprising story. We need to take a proactive stance over our natural reactive mindset to ensure we are better protected and mitigated against potential losses before they are realized.