Insurance industry needs to upscale risk assessment capabilities: Swiss Re

Global insured catastrophe losses in the first half of 2021 reached $42 billion, exceeding the ten-year average of $33 billion, according to  Swiss Re Institute’s preliminary sigma estimates.

The above figure includes $40 billion estimated insured losses from natural catastrophes and the remaining $2 billion of insured losses emerging from man-made disasters during the period.

Majority of these nat cat losses are driven by winter storms, intense heat waves and severe flooding around the globe, signalling the growing risks from secondary perils, fueled by rapid urban development and climate change.

“The effects of climate change are manifesting in warmer temperatures, rising sea levels, more erratic rainfall patterns and greater weather extremes. Taken together with rapid urban development and accumulation of wealth in disaster-prone areas, secondary perils, such as winter storms, hail, floods or wildfires, lead to ever higher catastrophe losses," said Martin Bertogg (pictured), head of Cat Perils at Swiss Re.

Bertogg stated that the experience so far in 2021 underscores the growing risks of these perils, exposing ever larger communities to extreme climate events. "For example, winter storm Uri reached the loss magnitude that peak perils like hurricanes can wreak," he said.

He added that "the insurance industry needs to upscale its risk assessment capabilities for these lesser monitored perils to maintain and expand its contribution to financial resilience."

Jérôme Jean Haegeli, Swiss Re’s group chief economist, said: “Climate change is one of the biggest risks facing society and the global economy. The recent analysis from the UN’s Intergovernmental Panel on Climate Change confirms expectations of more extreme weather in the future and urgency to act to limit global warming.

"Working with the public sector, the re/insurance industry plays a key role in helping to strengthen communities’ resilience by steering development away from high-risk areas, making adaptation investments, maintaining insurability of assets and narrowing protection gaps."

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