Rising losses from natural disasters

A report by Bloomberg Intelligence (BI) has found that the number of insured losses has risen by 360% over the past 30 years due to the “increased frequency and intensity” of natural disasters.

This has seen global insured losses from natural disasters reach an estimated US$118 billion – far above BI’s 2017–21 average of $97 billion.

BI noted that the consequence of this rise in insured losses is that insurers – particularly in the property and casualty (P&C) line of business – have raised premiums and exited regions they view as high-risk.

Natural disasters are also a major issue for the travel insurance sector, with many popular destinations being located in higher-risk areas.

Limited ability to reduce exposure

However, BI also warned that in the short term, reducing natural catastrophe exposure could cost insurers. It noted that while AXA XL Reinsurance raised prices by 10% in 2023, it took in 5% less revenue as a result of cutting its exposure.

“A repricing of climate risks has seen global property catastrophe reinsurance rates rise by as much as 30% at the start of 2024,” said Grace Osborne, Environmental, Social and Governance (ESG) Analyst at BI. “Rising premiums have served to improve loss ratios –total losses paid by insurers plus adjusted expenses over total earned premiums – despite increased insured losses. However, if the rate of increases continues, consumer appetite to shift climate risk to insurers could decline.”

BI also warned insurers against complacency last month, in the face of a quieter-than-average hurricane season in the west Pacific.