If you’re having trouble wrapping your mind around the spree of natural catastrophes currently plaguing the world—from deadly July floods in Germany and China to the wildfires still burning in Greece, California, and Siberia —you may be interested to know the professional risk calculators are too.
Climate change is exacerbating extreme and freak weather events so rapidly that even the insurance industry is struggling to keep up.
Late last week, reinsurance giant Swiss Re AG released its mid-year insurance losses, and the figures were the second-highest on record. Insurers had to cover $40 billion in losses caused by natural catastrophes. The previous ten-year average for the year’s first half is $33 billion.
The insurance losses increased even though total economic losses from the natural disasters they were based on decreased to $74 billion, down 31% from the previous year.
Martin Bertogg, head of catastrophic perils at Swiss Re, said that the industry had been challenged by what is known as “secondary perils.” That is, while the insurance industry has historically done an excellent job modeling relatively rare but potentially devastating events such as earthquakes and hurricanes, it’s battling to keep up with risks posed by snow storms, hail, tornadoes, and wildfires. Those used to cause minor damage but are increasingly morphing into something more costly. And that is a problem for companies since many Americans have coverage for such events.
Winter Storm Uri, which pounded Texas in February with snow and subfreezing temperatures, is a good example. Swiss Re said that Uri caused $15 billion in losses, making it the most significant loss from a winter event in U.S. history.
