According to Swiss Re, the Zurich-based reinsurance giant, extreme weather events have caused an estimated US$115 billion in insured financial losses worldwide this year. That’s 42 percent more than the 10-year average of $81 billion.
The company estimates $50 billion to $65 billion of total losses from Hurricane Ian, the Category 4 storm that battered parts of Florida’s west coast in late September with torrential rain, a 10-foot storm surge and winds in excess of 140 miles per hour. Swiss Re ranks Ian as the second costliest natural catastrophe of all time in terms of insured losses, after Hurricane Katrina that struck south Louisiana in 2005.
The damage is not only caused by severe storms. In February and March, a torrential downpour inundated much of north-east Australia and caused an estimated £4 billion in financial damage, more than any other natural disaster in the country’s history. In June, a series of violent thunderstorms in France sent large hailstones through rooftops and destroyed miles of vineyards. Total insured losses were estimated at around US$5 billion. All of these combined resulted in losses exceeding $100 billion for the second year in a row.
Swiss Re conducts this analysis in the context of providing reinsurance, a type of financial protection for insurance companies hoping to protect themselves from assuming all the risks in their portfolios. Climate change is increasingly posing major challenges for the industry as increasingly frequent and violent storms cause unprecedented financial losses.
In a press release announcing the results, Martin Bertogg, Head of Catastrophe Risks at Swiss Re, noted the steady increase in extreme weather events over the past few decades and stressed the importance of using updated models to enable the industry to more accurately predict losses specific year.
“When Hurricane Andrew struck 30 years ago, there had never been a $20 billion loss before,” Bertogg said. “There have been seven such hurricanes in the past six years.”
About 33 million homes on the US Gulf Coast and East Coast are at risk of hurricane damage, with an estimated total replacement cost of $10.5 trillion, according to real estate intelligence firm CoreLogic. The country’s coastal communities are typically underinsured, and chronically outdated federal flood maps fail to capture the risk for many flood-prone homes. Although uninsured homeowners can apply for federal funding after natural disasters, they can typically recover only a small fraction of their total damage.
The Federal Emergency Management Agency estimates that climate change will cause the size of high-flood-risk areas to increase by 55 percent along U.S. coasts and up to 45 percent along major river systems by the end of the century.