Natural Disaster Losses Below Average Through Q3, Despite Higher Frequency: Report

Although 2024 has seen significant global natural catastrophe activity, economic costs were slightly below average through the third quarter, according to Gallagher Re’s latest Nat Cat report.

The total economic loss from natural perils in the first three quarters of 2024 was at least US$280 billion, lower than the recent 10-year Q1-Q3 average of US$309 billion, said the report titled “Gallagher Re Natural Catastrophe and Climate Report: Q3 2024.”

The private insurance market and public insurance entities covered at least $108 billion of these losses, driven by a higher frequency of low to mid-size events, particularly in regions with higher insurance coverage.

Non-peak perils are driving the bulk of global insured losses through Q3 as the annual total tops $100 billion for the seventh time since 2017, the report said.

“The above average insured losses continued to be driven by a higher frequency of low/mid-size events (losses at US$2 billion or lower), especially in parts of the world with higher insurance coverage,” the report said.

Weather and climate-related disasters accounted for most insured losses, with the U.S. bearing more than 71% of the year’s insured losses through September, surpassing the region’s decadal average.

When focusing solely on weather and climate-related disaster costs (excluding earthquakes, volcanoes, and other non-atmospheric events), the economic cost was at least $264 billion, prior to early October’s arrival of Hurricane Milton (in the fourth quarter), which Gallagher Re said is lower than the decadal average of $286 billion.

Most Expensive Event

In Q3, the most expensive individual event was Hurricane Helene, which struck the U.S. in late September and is expected to cost public and private insurers between $10 billion and $15 billion alone.

“The recent landfalls of Milton and Helene in the United States — coupled with the significant third-quarter impacts from catastrophic flooding events in Europe, Asia and Canada — underscore the escalating volatility and intensity of weather and climate events,” commented Steve Bowen, Gallagher Re’s chief science officer.

Additionally, three other Atlantic hurricanes — Beryl, Debby and Francine — combined to cause approximately US$8 billion in industry losses, Gallagher Re continued. Notably, Debby’s remnant rainfall led to a near multi-billion-dollar flood loss in Montreal, Canada — marking one of the costliest natural catastrophe events on record for the Canadian insurance market.

From Q1 to Q3 2024, weather and climate events accounted for $103 billion, or 95%, of insured natural catastrophe losses, slightly lower than the decadal average of 97%. The U.S. continued to drive a major portion of global insured losses, as the aggregate toll from severe convective storm (SCS) events topped $50 billion for the second consecutive year, the report added. Other regions with higher-than-average insured losses included the rest of North America (primarily Canada) and the Middle East. Elsewhere, industry losses have remained largely manageable.

“After an unexpected lull in Atlantic hurricane activity during the peak months of August and September, there was an expectation that the remainder of the season might experience an increased level of development,” Bowen said.

Hurricane Milton was the fifth hurricane to make landfall in the U.S. this season, which has seen the second highest number of U.S. landfalls on record. “It was also the 10th major hurricane (Category 3+) to strike the continental U.S. since 2017 after it went 11 consecutive seasons without one (2006-2016). This remains a peril where a single event can dominate annual industry losses,” Bowen said.

Colorado State University, in partnership with the Gallagher Research Centre, has been examining the increasing trend of hurricane rapid intensification (RI) in the Atlantic Ocean and other global basins, which has been steadily escalating in the past four decades. Earlier this year, their observations highlighted the growing influence of how climate change is enhancing the warming trend in the world’s oceans and driving more extreme behavior with tropical cyclones.

“The reality is that the insurance industry is now having to adjust to the rapidly changing behaviours of natural catastrophe weather events due to a warming climate,” explained Dr. Iain Willis, head of the Gallagher Research Centre. “We’re already seeing the effects of climate change more clearly now, and the insurance industry needs to make sure the risk modelling of these hazards is keeping pace with their changing frequency and impact.”

Other key takeaways from the report include:

• Near-average losses for the global insurance industry
• Hurricane Helene was the costliest industry event through Q3 2024
• 51-plus billion-dollar economic loss events
• 28-plus billion-dollar insured loss events (19-plus multi-billion events)
• Warmest Q1-Q3 for the world on record dating to 1850
• Major humanitarian toll from flood and drought events.