Global economic losses for natural disasters hit an estimated US$77 billion (about £61.9 billion) in the first quarter – the highest Q1 total in a dozen years, according to a new report from Gallagher Re.
Public and private insurance entities covered an estimated $22 billion in losses, leaving a 72% (US$55 billion) protection gap, according to Gallagher Re’s Q1 2023 Natural Catastrophe Report.
Damages from the February earthquakes in Turkey and Syria cost an estimated US$45 billion, the report found. Of that, total insured losses are estimated to approach US$5 billion, the largest industry loss on record for the Turkey market.
When focusing solely on weather or climate-related disasters, which excludes earthquake peril, economic losses were estimated at a minimum of US$31 billion in Q1, the report said. Of that, public and private insurers covered US$17 billion – slightly more than half. The majority of the losses were associated with record severe convective storm activity in the US – which caused economic losses of more than US$13 billion and insured losses of more than US$10 billion – a series of atmospheric river events in California, flooding in New Zealand, and an ongoing drought across South America.
“The Turkey earthquake sequence is a difficult reminder of the significant vulnerabilities that exist to life and property from seismic events,” said Steve Bowen, chief science officer at Gallagher Re. “As the private and public sectors work together to develop a more resilient and adaptive society to current and future climate change risk, it is imperative that all natural hazard types, and not just weather or climate perils, are considered in the planning discussions.
“The high-dollar loss costs observed in Q1 2023, including those from notable thunderstorm and flood-related events, were marked by notable gaps in insurance coverage across both developed and emerging economic territories,” Bowen said. “This highlights the continued opportunity to develop tools and products that not only identify or quantify risk, but to make meaningful strides to ensure equitable protection for communities around the world.”
Above-average global temperatures and the transition from La Niña to El Niño drove weather events around the world, Gallagher Re said.
Global land and ocean temperatures during the first quarter were the fourth-warmest since 1850, according to the National Oceanic and Atmospheric Administration.
There were also wide differences in precipitation, with parts of Asia, Europe, Latin America and North America seeing continued low precipitation that exacerbated severe drought conditions. Other areas, including parts of the US, Africa, Oceana and the Middle East, saw record rainfall that drove widespread flooding.
The transition from La Niña to El Niño often causes the warming of global surface temperatures, as well as global precipitation and tropical cyclone patterns, Gallagher Re said.
“For the (re)insurance industry, El Niño brings a pivot in terms of physical loss and humanitarian impact potential around the world,” Bowen said. “Since El Niño correlates to warmer surface conditions, this allows for more volatility in weather patterns that can prompt floods to be more prolific and droughts to be more intense. This puts specific pressure on written agricultural insurance products or those in development. Additionally, an increased frequency potential of tropical cyclones in East Asia may bring higher regional catastrophe losses.”
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