Global Natural Disasters Cost Insurers $43B in H1, Surpassing 10-Yr Average: Munich Re

Natural disasters during the first half of 2023 cost insurers an estimated US$43 billion with an overall economic price tag of $110 billion, according to Munich Re.

These insured losses were slightly lower than the US$47 billion reported for the same period last year but were higher than the 10-year average for half-year losses of US$34 billion, said the reinsurer in a report published on July 27.

A similar picture exists for economic losses during H1 2023, which were lower than the US$120 billion reported in H1 2022 but still above the average for the last 10 years of US$98 billion (inflation-adjusted), said the report, titled “Earthquakes, thunderstorms, floods: Natural disaster figures for the first half of 2023.”

In a separate report issued on July 20, insurance broker Aon estimated higher H1 figures for global insured catastrophe losses at $53 billion and higher economic losses of $194 billion. The global economic losses of $194 billion were notably above the 21^st-century average of $128 billion, the fifth highest on record, and the highest since 2011, according to Aon in its report, titled “Global Catastrophe Recap: First Half of 2023.” (Overall economic losses include insured and uninsured losses).

Munich Re and Aon said the devastating earthquake in Turkey and Syria in early February is responsible for highest overall economic losses. Munich Re estimates an overall cost of US$40 billion, with Syria accounting for roughly US$5 billion of that total. The insured portion of overall losses total only about US$5 billion. On the other hand, Aon reported that the Turkey-Syria earthquake was responsible for nearly half of its estimated economic loss total, or approximately $91 billion, with insured losses of more than $5.6 billion (considering both public and private insurance schemes).

In total, H1 2023 saw at least 25 individual billion-dollar economic loss events, said Aon, noting that all but one of those events were
weather-related, with 17 registered in the U.S., followed by four in Asia Pacific, three in EMEA (Europe, the Middle East and Africa), and one in the Americas.

Aon said that global insured losses were largely driven by severe convective storm activity in the U.S. with eight multi-billion-dollar events, although it lists the February earthquakes in Turkey and Syria as the most costly insured event ($5.6 billion-plus). Conversely, Munich Re lists H1’s single costliest insured event as a series of thunderstorms in mid-June which had a price tag of approximately $7 billion.

Insurance Protection Gap

“Less than 40% of overall losses in the first half of the year were insured – evidence of the large insurance gap that persists in many countries for multiple natural hazards,” said Munich Re’s report, noting that insurers bore around 35% of worldwide losses in terms of the average half-year losses in the period 2013–2022.”

Conversely, Aon estimated that only about 27% of economic losses this year were insured.

Extreme Storms in U.S.

Multiple rounds of extreme thunderstorms in the U.S., which included tornadoes and hail, accounted for approximately one-third of overall global losses, the Munich Re report continued.

Aon confirmed that global insured losses were dominated by severe convective storms at nearly $37 billion, surpassing the historical H1 record set in 2011, with more than 95% of SCS losses occurring in the U.S. “In the first half of 2023, U.S. SCS activity was responsible for at least 13 individual billion-dollar events and $35 billion in total preliminary insured losses, setting a new H1 record.”

“Overall losses from these [extreme storms] came to more than US$35 billion, of which more than US$25 billion was insured. Losses of this magnitude from severe thunderstorms in the USA now seem to be normal occurrences, rather than outliers,” Munich Re said. “After adjustment for inflation, higher first-half thunderstorm losses have only occurred once before in the USA (in 2011, with US$46 billion in overall losses and US$29 billion in insured losses).”

The costliest single event this year thus far was a series of thunderstorms in mid-June, which hit large parts of Texas, the Munich Re report said, explaining that squalls and hailstones measuring up to 12 centimetres in diameter – almost twice the size of a tennis ball – caused the most serious damage with more than 50 tornadoes recorded. “The overall loss for this outbreak is estimated at around US$8.4 billion, of which approximately US$7 billion was insured.”

North America’s Thunderstorms

The overall economic price tag of disasters in North America (for the U.S. and Canada combined) were $42 billion, of which approximately US$32 billion was insured, which Munich Re said, reflects the region’s high insurance penetration for thunderstorm losses. “As usual, extreme severe thunderstorms in the USA in the first half of the year, in conjunction with other disasters, accounted for North America’s high share in worldwide losses.”

Although the extreme wildfires in Nova Scotia in northeastern Canada attracted global attention when smoke spread across large parts of the eastern U.S., Munich Re said the fires hit regions that were relatively sparsely populated, which “helped keep direct losses within reasonable limits” and there were no major losses for insurers.

Europe’s Quakes, Floods

As a result of the earthquake disaster in Turkey, the proportion of overall losses in Europe in the first half of 2023 was exceptionally high. Of roughly US$59 billion (€48 billion) in overall losses, only some US$7 billion (€6.7 billion). (Just a reminder: the overall economic price tag for the Turkey-Syria earthquake was US$40 billion with insurance covering about US$5 billion of that amount).

Other disasters in Europe included severe floods in northeastern Italy and neighboring countries, which resulted in high losses.

Particularly affected was the Emilia-Romagna region in northern Italy, where after two years of drought, the area experienced several episodes of extreme rainfall in May when as many as 23 rivers flooded. “An analysis of the event concluded that there was a 1-in-200-year probability of such prolonged heavy rainfall in the affected region,” the report said.

Due to the high level of urbanization, the floods were very expensive, Munich Re said, citing overall losses of roughly US$10 billion (€9 billion), with insurers paying just US$1.1 billion (€1 billion) of the total. The insurance penetration is low because flood risk is not covered under standard building insurance in Italy – similar to many other countries, the report explained.

Asia-Pacific’s Disasters

In the Asia-Pacific region, natural disasters caused overall economic losses of approximately US$7 billion, of which roughly US$3 billion was insured, Munich Re said. New Zealand saw high losses from flooding following heavy rainfall, as well as Cyclone Gabrielle making landfall, said the report, adding that assets worth some US$4.3 billion were destroyed, of which around US$2.9 billion was insured.

“Two back-to-back, billion-dollar disasters impacted the North Island of New Zealand within a three-week period in the first quarter of 2023: remnants of Cyclone Gabriele and severe flooding in Auckland. These events are ranked as the fifth and sixth costliest events for insured losses in New Zealand overall, only surpassed by the earthquakes of 2010, 2011 and 2016,” said Aon in its report.

Munich Re noted that Cyclone Freddy was probably the longest active tropical cyclone since records began, forming north of Australia at the start of February and subsequently traversing the entire Indian Ocean. It claimed a large number of lives in Mozambique and other countries in southeastern Africa. Overall losses in Mozambique and neighboring countries came to approximately US$1.5 billion, but due to the very low insurance penetration in these low-income countries, only a small portion of the losses was insured, Munich Re said.

Source: Munich Re and Aon

Photograph: Residents pick up debris at a Phillips 66 gas station after a tornado, on Thursday, June 22, 2023, in Matador, Texas. A line of severe storms produced what a meteorologist calls a rare combination of multiple tornadoes, hurricane-force winds and softball-sized hail in west Texas, caused significant damage around the town. (Annie Rice /Lubbock Avalanche-Journal via AP)