鶹ýapp

鶹ýapp Risk Barometer 2024 -
Rank 3: Natural catastrophes

Expert risk article | January 2024
After slipping down the rankings, nat cat has once again gained priority statusafter a year of headline events, many of them taking a terrible toll on human lifeand incurring record-breaking insurance losses.
The most important corporate concerns for the year ahead, ranked by 3,069 risk management experts from 92 countries and territories.

Devastating earthquakes, catastrophic floods, record-breakingwildfires, and severe convective storms (SCS)have shunted natural catastrophe three places up the riskradar for 2024.

The year’s costliest nat cat events were the M7.8 and M7.5earthquakes that struck Turkey and Syria in February,causing insured losses of over $6bn, as well as a tragic lossof human life [1].

Total economic losses from nat cat in 2023 are estimatedto be $260bn, according to analysis by Swiss Re. A highnumber of low-to-medium-severity events added upto insured losses that will exceed $100bn for the fourthconsecutive year, with SCS the main contributor. Oftenreferred to as a ‘secondary’ peril, SCS resulted in insuredlosses that reached an all-time high of $60bn in 2023 –almost 90% more than the previous five-year average of$32bn. The US, which is particularly prone to such storms,experienced 18 events that each incurred insured lossesof $1bn and above, with total insured losses for SCSexceeding $50bn for the first time [2].

Around the world, nat cat was the #1 risk in Croatia,Greece, Hong Kong, Hungary, Malaysia, Mexico, Morocco,Slovenia, and Thailand, and ranked in the top three formany countries, such as the US, the UK, Australia, Japan,and Turkey.

“It’s no surprise most of the countries which rank the riskof natural catastrophes and the related peril of climatechange the highest are those that sustained some of themost significant events of the year,” says Mabé VillarVega, Catastrophe Risk Research Analyst, 鶹ýappCommercial. “The increasing influence of changingclimate conditions boosted the development of certainevents in 2023, and nat cat is now the cause of businessinterruption businesses fear the most (44% of responses)after cyber incidents.”

2023 is believed to be the hottest year on record, withheatwaves or droughts afflicting areas of southern Europe,the US, Canada, Central and South America, NorthAfrica, and Asia. Sustained dry conditions intensified andcontributed to the spread of wildfires in many regions,including Canada, which recorded its most destructivewildfire season, and Greece, where a wildfire near the cityof Alexandroupolis became the largest in the EuropeanUnion’s recorded history. In Maui, Hawaii, the deadlyLahaina wildfire is estimated to have caused economiclosses of $5.5bn, with insured losses of $3.4bn [3].

Ranking history globally:

  • 2023: 6 (19%)
  • 2022: 3 (25%)
  • 2021: 6 (17%)
  • 2020: 4 (21%)
  • 2019: 3 (28%)
Top risk in:
  • Croatia
  • Greece
  • Hong Kong
  • Hungary
  • Malaysia
  • Mexico
  • Morocco
  • Slovenia
  • Thailand

Elsewhere, catastrophic flooding was recorded in manyregions, including Hong Kong, China, India, Libya, theGreat Lakes of East Africa, Slovenia, and Italy. Heavyrainfall in Italy’s Emilia-Romagna region racked up insuredlosses of $600mn, making it the costliest weather-relatedevent in the country since 1970 [4]. In the US, a series of‘atmospheric rivers’ – regions in the atmosphere that carrywater – brought heavy rain to California, Nevada, Arizona,and Utah between January and March, with economiclosses estimated at over $3.4bn [5].

Exceptionally warm sea surface temperatures in theNorth Atlantic led to an above-average hurricane season,despite initial forecasts pointing to more subdued activity– 20 named storms meant this was the fourth highesttotal in a year since 1950 [6]. Hurricane Idalia was the mostsignificant event, registering insured losses of $3.5bn [7].

The effects of the El Niño climate pattern contributedto intensified tropical cyclone activity in the WesternNorth Pacific, the most significant event being TropicalCyclone Doksuri, which caused economic losses of $20bnin mainland China [8]. In the eastern Pacific, Tropical StormHilary affected California and Mexico, while Hurricane Otiscaused widespread damage to Acapulco in Mexico.

A series of hailstorms in July set a record for the largestEuropean hailstone – 19cm in Italy – during a number ofextreme-weather events believed to have caused $1.1bninsured losses and $4bn economic losses [9]. “Hailstorms aredeemed a secondary peril, but they are intensifying and candrive severe losses,” says Villar Vega. “In August, HailstormDenis in southern Germany damaged roofs, windows andeven the interiors of many properties (insured losses fromthis event were estimated at $230mn [10]).

“Nat cat events, particularly those related to weather andclimate, are expected to increase and therefore they willhave an impact on the insurance industry, from modelupdates to pricing and underwriting strategies. Resilienceand business continuity plans must be prioritized for 2024,”Villar Vega concludes.


The aftermath of Hurricane Idalia, Florida

[1]Swiss Re, Insured losses from severe thunderstorms reach new all-time high of USD 60 billion in 2023, SwissRe Institute estimates, December 7, 2023
[2] Swiss Re, Insured losses from severe thunderstorms reach new all-time high of USD 60 billion in 2023, SwissRe Institute estimates, December 7, 2023
[3] Gallagher Re, Natural Catastrophe Report, October 2023
[4] Swiss Re, Severe thunderstorms account for up to 70% of all insured natural catastrophe losses in first halfof 2023, Swiss Re Institute estimates, August 9, 2023
[5] Gallagher Re, Natural Catastrophe Report, October 2023
[6] National Oceanic and Atmospheric Administration, 2023 Atlantic hurricane season ranks 4th for most-namedstorms in a year, November 28, 2023
[7] Moody’s RMS, Moody’s RMS estimates US$3 billion to US$5 billion in private market insured losses frommajor hurricane Idalia, September 4, 2023
[8] Gallagher Re, Natural Catastrophe Report, October 2023
[9] Gallagher Re, Natural Catastrophe Report, October 2023
[10] Süddeutsche Zeitung, Hagelsturm “Denis”: Schäden noch viel höher als angenommen, November 23,
2023

Pictures: Adobe Stock

Keep up to date on all news and insights from 鶹ýapp Commercial