Natural disasters will cause annual insurer losses of $151 billion

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(Bloomberg) — Urban sprawl, property exposure and climate change could fuel a 40 percent increase in annual natural catastrophe losses for the global insurance industry, according to a new report.

The annual loss could rise to $151 billion from the average annual loss of $106 billion reported over the past five years, according to analysis by Verisk, a risk modeling firm. Of the estimated $151 billion in losses, $119 billion is not related to crop damage.

“Although the largest event is anticipated from a hurricane or earthquake, severe convective storms, extratropical storms, wildfires and flooding represent a significant portion of the risk, accounting for slightly more than half” of the $119 billion modeled loss, Verisk . said.

The company’s calculation suggests that climate change accounts for about 1% of the annual increase in losses, with increased exposure and inflation being the main contributors. However, the impact of climate change “is expected to become more significant over the next few decades,” the report said.

Warmer global temperatures affect all atmospheric hazards, including tropical cyclones, but their impact is more immediate and pronounced on wildfires, floods and severe storms, according to Verisk.

While no weather event caused losses of more than $10 billion for insurers last year, there were 37 storms that each cost at least $1 billion, according to a previous report. report published by Aon Plc. That’s more than ever before and well above the average of 14 such storms in a single year, the insurance broker said.

The challenge for Verisk and its rivals is to accurately model storms and other modest-sized disasters that occur more frequently and cause more damage overall.

While there is a good understanding of how a warming climate affects wildfires and flooding, “the relationship with severe storms is less scientifically established,” Verisk said.