According to broker Aon, the insurance and reinsurance industry is underwriting natural catastrophe losses at an estimated $53 billion, about 46% higher than the 21st century average.
As its brokerage rival Gallagher Re reported earlier this week, Aon said severe convective storm activity in the US was the main source of insured losses in the first six months of the year.
Aon highlighted “sustained SCS activity in the United States” that resulted in 13 multibillion-dollar industry loss incidents during this period.
Aon also highlighted ongoing inflation trends affecting the volume of losses.
“Disaster costs continue to be influenced by persistent inflationary pressures in many parts of the world, as well as other social factors such as demographics and wealth distribution, which remain major contributors to financial losses,” the brokerage group said.
In terms of natural catastrophes, Aon estimates global economic losses totaling US$194 billion in the first half of 2023.
That’s again above the $128 billion average for the first half of the 2000s, but perhaps more notably, it’s the fifth-highest on record and the highest since 2011.
The devastating earthquake in Turkey and Syria, which caused nearly half the economic damage, estimated at $91 billion, has become the worst global disaster since 2010 and the costliest in the modern history of both countries.
Aon said economic losses in the EMEA region due to the quake were “unprecedented” at $111 billion, well above the first-half record of $71 billion set in 1990.
“While communities around the world remain at catastrophe risk, only around 27% of economic losses have been insured this year. These devastating events highlight the importance of resilience and risk reduction, such as enforcing building codes, as highlighted by the earthquakes in Turkey and Syria,” commented Michal Lörinc, Head of Disaster Insights at Aon. “As we continue to face interconnected risks, we’re focused on expanding risk mitigation to help organizations make better decisions to close global protection gaps and enrich lives around the world.”
Returning to severe convective storms, Aon noted that preliminary insured losses for the first half were estimated at $35 billion, a new first-half record.
Of course, the level of losses experienced has implications for the reinsurance industry, even if more losses are retained at the primary insurer level.
We have seen evidence of these convective storm losses in reports such as reinsurer/insurer QBE boosting catastrophe budget, insurer Travelers Q2 catastrophe losses impacting its performance, and insurer Allstate revealing a heavy burden of catastrophe losses in Q2.
Aon explained the impact of relatively high catastrophe loss activity in the first half, saying: “Going into 1/1 renewals, reinsurers are watching these trends carefully and expressing concern about increased event frequency.
“Insurers need to demonstrate their view of risk to differentiate their portfolios and prepare for potential disaster in Q3 and Q4.”