Natural disasters caused $76bn of insurance losses in 2020
Losses have been driven by severe storms, floods, tornadoes and wildfires in the US. If man-made disasters are factored in, this figure increases to $83bn. As such, the company notes, 2020 has been the fifth-costliest year for the industry since 1970, with economic losses standing at 45%, 8% above the 10-year average.
COVID-19 may have stolen significant portions of the headlines this year, but Swiss Re reminds us that climate change, particularly rising global temperatures which provide a more fertile atmosphere for extreme weather, is a problem that cannot be ignored.
A huge test for insurance
”As with COVID-19, climate change will be a huge test of global resilience. Neither pandemics nor climate change are 'black swan' events. But while COVID-19 has an expiry date, climate change does not, and failure to 'green' the global economic recovery now will increase costs for society in future,” said Jerome Jean Haegeli, Group Chief Economist.
Furthermore, continues Martin Bertogg, Head of Cat Perils, with Occidental hurricane activity projected to increase in 2021 and beyond, the issue shows no clear sign of resolution:
”Large-scale climate conditions in the North Atlantic suggest elevated hurricane activity for 2021 and likely beyond. This increases the probability of a catastrophic landfall. Combined with the loss impact of secondary perils accelerated by climate change, insured catastrophe losses will only rise in the future.”
Finding a solution
Adopting new technologies and working closely with customers and policymakers could help to bolster resilience through climate-related programmes, Deloitte suggests. The aim would be to reassure “regulators and other stakeholders about their ability to withstand extreme weather events and effectively transition to a low-carbon economy.”
With the general consensus seeming to indicate that climate change will only continue to worsen industry strains, finding a balance between affordability, availability and stability will be key to the industry’s future.