Global, Monday 30 January 2023: The global need to ramp up natural hazard mitigation and climate adaptation efforts has once again been highlighted by the increasing severity and frequency of annual catastrophe losses. Another year of complex natural hazard events in 2022 resulted in a direct economic cost of USD 360bn, according to the 2022 Natural Catastrophe Report published today by Gallagher Re, the global reinsurance broker. The insurance industry covered USD 140bn of this total, marking the fifth year since 2017 to cross the USD 100bn threshold for insurers.
The year featured another series of costly, consequential, and record-setting natural catastrophe events around the world that again brought into focus the need to better account for the growing risks these hazards bring. Insurance plays an important role in the aftermath of events, with private insurers covering USD 125bn of losses and public insurance entities covering another USD 15bn.
Steve Bowen, Chief Science Officer at Gallagher Re, said: “The financial cost of natural hazards continues to increase, and we are further recognizing that a consistently high global protection gap – 61% in 2022 – means that much more opportunity exists to help people prepare before and after a disaster occurs. As catastrophe losses grow more expensive, we again look to the connected nature of climate change, exposure growth, and social inflation as important issues enhancing eventual loss costs. The increase in severity, and in some cases the frequency of “secondary” peril events, presents (re)insurers with a multi-faceted and complicated challenge when it comes to risk protection and mitigation.”
He added: “How we collectively bring together financial institutions (insurance, asset managers, real estate, banking), governmental entities, academia, and emergency management to identify risk will be critical as we implement actionable plans to improve our resilience, mitigation and adaptation-readiness. Such action will result in favorable impacts when trying to slow the rate of annual catastrophe loss growth.”
The US endured several large-scale and impactful events in 2022, led by Hurricane Ian. The storm was poised to result in a minimal USD 55bn loss for public and private insurance entities, and an overall economic loss of USD 112bn in the US alone. This marked one of the costliest natural disaster events ever recorded globally. The country also endured a prolific drought that resulted in USD 9bn in crop insurance indemnity payouts. Three severe convective storm (SCS) outbreaks resulted in a multi-billion-dollar insured loss alone. This aided in 2022 becoming the 15th consecutive year with aggregate insured SCS losses topping USD 10bn and the 8th year since 2010 that such losses have topped USD 20bn.
Outside the US, the costliest event and one of the most consequential from a humanitarian perspective was the prolific seasonal monsoon flooding in Pakistan. A report from the World Bank cited a USD 15bn direct physical damage economic loss, while the country’s National Disaster Management Authority cited 1,739 fatalities, 2.3 million homes damaged, and 33 million people affected across 90 districts.
Historic flooding also impacted several regions of Africa, notably in Nigeria and South Africa, where each country’s insurance industry faced ones of its costliest natural catastrophe events on record. The effects of a third consecutive La Niña brought record-setting rainfall to parts of Eastern Australia. The Insurance Council of Australia stated weather-related events had resulted in nearly USD 5bn in payouts, with the bulk coming from a historic flood event in late February and March.
Other notable global events in 2022 included: a series of record summer heatwaves in Europe that led to excess mortality totals into the tens of thousands; a powerful March offshore earthquake in Japan; record-setting SCS activity in France; extensive drought conditions across South America, Europe, and parts of Asia; typhoon landfalls in Japan and the Philippines; Hurricane Fiona landfalls in Puerto Rico and Canada; multiple strong European windstorm vents to wrap the 2021-2022 season; and, an intense May derecho in Canada.
Steve Bowen concluded: “The fingerprints of climate change were visible on virtually every major weather and climate event in 2022, once again highlighting the urgency to implement proper planning and investment strategies that will limit the risk to life and property. The implications of climate change on daily weather and climate events continues to be more evident and better understood. While we are still trying to account for uncertainties that exist in how climate change may influence events on a regional and per peril basis, it is clear that impacts from the phenomenon are not future tense. They are already being felt today.”