Estimated insured losses from natural catastrophes reached US$40 billion during the first half – driven by a deep winter freeze, hailstorms and wildfires, while man-made disasters triggered another estimated US$2 billion of insured losses, according to Swiss Re.
The loss total for natural catastrophes ($40 billion) is above the previous 10-year average of $33 billion and the second highest on record for a first half after 2011, when major earthquakes in Japan and New Zealand pushed the six-month total to US$104 billion, said Swiss Re Institute’s preliminary sigma estimates.
On the other hand, man-made disasters were less than usual — a likely reflection of remaining COVID-19 restrictions, the report indicated.
Swiss Re once again highlighted the costs of secondary peril events from winter storms, intense heatwaves and severe flooding around the globe. Swiss Re said the growing risks of secondary perils is being fueled by rapid urban development and climate change.
(Editor’s note: Secondary perils are generally defined as smaller to mid-sized events, or the secondary effects, which follow a primary peril, such as hurricane-induced flooding, storm surges, hailstorms, tsunamis, and fire after an earthquake).
“The effects of climate change are manifesting in warmer temperatures, rising sea levels, more erratic rainfall patterns and greater weather extremes. Taken together with rapid urban development and accumulation of wealth in disaster-prone areas, secondary perils, such as winter storms, hail, floods or wildfires, lead to ever-higher catastrophe losses,” commented Martin Bertogg, head of Cat Perils at Swiss Re.
“The experience so far in 2021 underscores the growing risks of these perils, exposing ever larger communities to extreme climate events. For example, winter storm Uri reached the loss magnitude that peak perils like hurricanes can wreak,” he said. “The insurance industry needs to upscale its risk assessment capabilities for these lesser monitored perils to maintain and expand its contribution to financial resilience.”
Additional findings from the report include:
- Winter storm Uri caused an estimated US$15 billion insured losses in the U.S., the highest ever recorded for this peril in the country and around 38% of all estimated insured losses from natural catastrophes in the first half.
- Severe weather, including thunderstorms, hail and tornadoes hit Europe in June, causing insured losses of approximately US$4.5 billion.
- Extreme heat broke temperature records across western Canada and the northwestern U.S. in June, with temperatures reaching more than 45°C (113°F) for consecutive days. The heat, coupled with severe drought conditions, led to wildfires that spread south to California.
- Global economic losses from disaster events are estimated at US$77 billion in the first half of 2021. (Editor’s note: Economic losses are the costs of both insured and uninsured costs).
- Of the total estimated economic losses in the first half of 2021, US$74 billion were caused by natural catastrophes, while man-made disasters triggered an additional US$3 billion.
- Close to 4,500 people lost their lives or went missing in disaster events in the first half.
Natural Disasters in Second Half
The second half of the year also will be expensive for insurers as severe flooding in July brought property destruction and loss of life in Europe and China.
Floods in Germany and its neighbouring countries are expected to cause substantial insured losses, estimated in Germany alone at €4.5 billion-€5.5 billion (US$5.3 billion-US$6.5 billion), according to the German Insurance Association. In China, severe flooding in Henan province resulted in estimated insured claims of CNY11 billion (US$1.7 billion), according to the China Banking and Insurance Regulatory Commission.
In August, extreme heat fueled wildfires in Turkey, Greece and Italy, which are expected to lead to further economic and insured losses.
“Climate change is one of the biggest risks facing society and the global economy. The recent analysis from the UN’s Intergovernmental Panel on Climate Change confirms expectations of more extreme weather in the future and urgency to act to limit global warming,” said Jérôme Jean Haegeli, Swiss Re’s group chief economist.
“Working with the public sector, the re/insurance industry plays a key role in helping to strengthen communities’ resilience by steering development away from high-risk areas, making adaptation investments, maintaining insurability of assets and narrowing protection gaps,” added Haegeli.
Photograph: A firefighter uses a drip torch to ignite vegetation while trying to stop the Dixie Fire from spreading in Lassen National Forest, Calif., on Monday, July 26, 2021. Photo credit: AP Photo/Noah Berger.
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