Natural disasters have caused economic damage of at least $268 billion (€257 billion) this year. People or companies were insured for less than half of that destruction, according to a report by reinsurer Swiss Re. According to the Swiss Financial Group, this indicates a large gap that exists worldwide between the financial risks of natural disasters and the protection provided by insurance against them.
Damage to victims of disasters such as hurricanes in the United States, hailstorms in France or floods in Australia has so far reached $115 billion. This will make 2022 the second year in a row that insured losses due to natural disasters exceed US$100 billion.
According to Swiss Re, which acts as an underwriter for insurance companies, there has been a trend over the past ten years where insured damages as a result of natural disasters are steadily increasing. It is therefore important for insurance companies to adapt their risk models to a world in which natural disasters are becoming more frequent and more severe.
Hurricane Ian, which hit West Florida in September, caused the most damage of all natural disasters. According to preliminary estimates from Swiss Re, the high winds and torrential rain associated with this hurricane cost insurers from $50 billion to $65 billion. Only Hurricane Katrina in 2005 caused more financial damage. Winter storms in Europe caused $3.7 billion in insured damage in February.
Earlier this year, the Dutch Association of Insurance Companies warned that extreme weather conditions are becoming more common as a result of climate change. Damage peaks are getting higher and higher. This also raises the question of whether the massive damage that would be caused by sea level rise can still be secured. Earlier this month, De Nederlandsche Bank said that increased flood risks, for example, should become more insurable.
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