Extreme weather events have caused an estimated $115 billion in insured financial losses around the world this year, according to Swiss Re, the Zurich-based reinsurance giant. That’s 42 percent higher than the 10-year average of $81 billion.
The firm estimates that $50 billion to $65 billion of the total losses resulted from Hurricane Ian, the Category 4 storm that battered parts of Florida’s west coast in late September with torrential rain, a 10-foot storm surge and winds of more than 140 miles per hour. Swiss Re ranks Ian as the second costliest natural disaster ever, in terms of insured losses, after Hurricane Katrina in southern Louisiana in 2005.
It is not only violent storms that cause the damage. In February and March, torrential rain flooded large parts of northeastern Australia and caused an estimated $4 billion in financial damage, more than any other natural disaster in the country’s history. In June, a series of violent thunderstorms in France sent large hailstones tearing through roofs and destroying kilometers of vineyards. The total insured losses were estimated at about $5 billion. All of them combined to increase losses over $100 billion for the second year in a row.
Swiss Re does this analysis as part of providing reinsurance, a type of financial protection for insurance companies hoping to protect themselves from absorbing all the risk in their portfolios. Climate change has begun to pose major challenges to the industry, as increasingly frequent and severe storms cause unprecedented financial losses.
In a press release announcing the findings, Martin Bertogg, Head of Catastrophe Risk at Swiss Re, noted the steady increase in extreme weather events over the past few decades, and emphasized the importance of using updated models so that the industry can more accurately can predict damage in a given year.
“When Hurricane Andrew hit 30 years ago, a loss of USD 20 billion had never happened before,” said Bertogg. “Now there have been seven such hurricanes in just the last six years.”
About 33 million homes on the U.S. Gulf Coast and East Coast are at risk of hurricane damage, according to real estate intelligence firm CoreLogic, with a total estimated replacement cost of $10.5 trillion. The nation’s coastal communities tend to be underinsured, and chronically outdated federal flood maps fail to capture the risk to many flood-prone homes. Although uninsured homeowners can apply for federal funding after natural disasters, they are usually only able to recover a small fraction of their total losses.
The Federal Emergency Management Agency estimates that climate change will increase the size of areas at high flood risk by 55 percent along U.S. coastlines and up to 45 percent along major river systems by the end of the century.