Weather blows up insurance losses to $40bln

Wildfires, US winter storms and tornadoes in Europe helped deal an estimated $40bn blow to global insurers in the first half of 2021, marking the worst start to a year for natural catastrophe insurance in a decade.

Reinsurance group Swiss Re said extreme weather caused by climate change and rapid urban development in disaster-prone areas had driven “ever higher natural catastrophe losses”. It represented the biggest insured first-half loss since earthquakes in Japan and New Zealand in 2011, and the second biggest on record for the period. The North American winter storm Uri caused an estimated $15bn loss for insurers, the biggest hit for such an event on record.

While Swiss Re did not forecast claims for the second half of the year, “the stage is set” for what could be record losses, according to Martin Bertogg, the group’s head of catastrophe perils. He pointed to severe floods in China and Europe in July, with the worst of the hurricane season still to come.

In Germany alone, insurers were expecting claims of €4.5bn to €5.5bn from last month’s devastating floods. Aon, an insurance broker, said on Wednesday that this was likely “to rank as the costliest weather event and second-costliest natural disaster event in Europe in the past 40 years”, after adjusting for inflation, only behind the damage from the Irpinia earthquake in Italy in 1980. Bertogg also pointed to the rising threat of “secondary perils”, or catastrophes that did not historically have the financial impact of events such as earthquakes or hurricanes. These were now regularly reaching $1bn in losses, he said. The rising costs reflect the increased threat to the insurance sector as extreme weather combines with population growth and construction that can result in less water being absorbed into the ground, for example.

Global economic losses from natural and human disasters, which include insured and uninsured damage, were $77bn in the first half of 2021, below the 10-year average. Nearly 4,500 people lost their lives or went missing in these events, Swiss Re said. The estimates of the financial toll follow the latest UN Intergovernmental Panel on Climate Change report charting “unequivocal” evidence of global warming as a result of human activity.