Insured losses from NatCat surge to $151b, fueled by urban growth

The five-year average annual loss is at $106b.

The average annual loss (AAL) from global natural catastrophes has reached a new high of $151b, with non-crop losses accounting for $119b, revealed Verisk’s 2024 Global Modeled Catastrophe Losses Report.

The report from Verisk’s Extreme Event Solutions business shows that the growth in property replacement values, driven by new construction and inflation, has contributed to an average exposure growth of 7.2% across modelled countries over the past five years. 

This increase in exposure, alongside rapid urban expansion, climate change, and rising inflation, has intensified the risk of insured losses.

“Whilst actual annual insured losses over the past five years have been high, averaging $106b, they should not be seen as outliers,” Rob Newbold, president of Verisk Extreme Event Solutions, said

“Our models show the insurance industry should be prepared to experience total annual insured losses from natural catastrophes of $151b on average, and well more than that in large loss years. With this information, (re)insurers can prepare for large loss years and truly own their risk with confidence, so they can be better positioned to manage these challenging years without risking their solvency,” Newbold added.

The report attributes the rise in global insured natural catastrophe losses to several factors, including the expansion of urban areas, increased exposure growth, and the effects of climate change. 

With more than half of the global population now living in urban areas, particularly in rapidly developing countries, exposure levels have risen significantly. This trend is expected to continue, further driving up insured losses.

Dr. Jay Guin, executive vice president and chief research officer for Verisk Extreme Event Solutions, noted that whilst climate change currently accounts for about 1% of the annual increase in losses, its influence is likely to grow over the next few decades. 

“This is a signal that the insurance industry needs to be proactive and utilize advanced, forward-looking models to better estimate risk and guide internal decision-making,” Guin said.

The report also highlights that in 2023, insured losses were primarily driven by severe thunderstorms rather than hurricanes or earthquakes. 

The US experienced a record-setting severe thunderstorm season, contributing over $57b to the total insured losses. 

The adjusted AAL for U.S. severe thunderstorms over the past five years has increased to approximately $39b, up from $23b in the previous five-year period.