Natural disasters resulted in global economic losses of USD 275 billion in 2022
- Published: Friday, 24 March 2023 10:01
2022 was the second consecutive year in which insured losses from natural catastrophes exceeded the USD 100 billion mark. This reaffirms the trend of a 5 - 7 percent average annual increase in insured losses over the past three decades, according to Swiss Re’s latest sigma report. Total losses from natural diasters around the world reached USD 275 billion in 2022, with USD 125 billion of the losses being insured.
"The magnitude of losses in 2022 is not a story of exceptional natural hazards, but rather a picture of growing property exposure, accentuated by exceptional inflation", said Martin Bertogg, Head of Catastrophe Perils at Swiss Re. "While inflation may subside, increasing value concentration in areas vulnerable to natural catastrophes remains a key driver for increasing losses. For our industry this is a call both to reflect the latest exposure even more carefully in risk assessments while continuing to support society in being better prepared."
With natural disasters continuing to cause property damage across the world, the demand for coverage has grown. At the same time, inflation has surged over the last two years, averaging 7 percent in advanced economies and 9 percent in emerging economies in 2022. The effect of high prices has been to increase the nominal value of buildings, vehicles and other insurable assets, thus pushing up insurance claims for damage caused by natural catastrophes.
"The economic storm is not over, and interest rates will likely have to increase further given existing inflation pressure. This means higher financing costs and, as a result, capacity providers are likely to remain more cautious in deploying capital for a number of reasons, including risk assessment and loss experience. In our view, as higher exposures encounter shrinking risk appetite, momentum for rising prices, higher retentions and tighter terms and conditions will likely continue", said Jérôme Jean Haegeli, Swiss Re’s Group Chief Economist.
Hurricane Ian was the main loss driver in 2022
Insured losses were largely driven by Hurricane Ian, by far the year's costliest event. Making landfall in Florida in September as a category 4 storm, Ian resulted in estimated insured losses of USD 50–65 billion. After Hurricane Katrina in 2005, Ian ranks as the second-costliest natural catastrophe insured loss event on sigma records.
In February 2022, a cluster of storms (Eunice, Dudley, Franklin) in north-western Europe triggered combined insured losses of over USD 4 billion, bringing the total for this category to almost double the previous 10-year average. Meanwhile, France saw the highest ever annual loss (USD 5 billion) from hailstorms.
Global losses from floods were above average, the main event being flooding in eastern Australia in February-March 2022. This resulted in insured losses of USD 4.3 billion, the biggest natural catastrophe claims event ever in Australia.
On the opposite end of the rainfall spectrum, weather variability and anomalous atmospheric circulation conditions contributed to severe droughts and record-breaking heatwaves across the world. In Brazil, crop yields, particularly soybean and corn, suffered most, resulting in insured losses of USD 1 billion.