Verisk estimates the average annual insured loss under Nat Cats’ global model at $151 billion

Over the past five years, annual insured losses from natural catastrophes averaged $106 billion, up from $83 billion in the previous five-year period, new data from Verisk shows.

And with a noticeable increase in extreme weather lately, the insurance industry should prepare: Verisk estimates the global average annual insured loss (AAL) modeled from natural catastrophes at $151 billion.

The growing losses are fueled by rapid urban expansion and climate change, according to the authors of the Global Modeled Catastrophe Losses 2024 Report from the Verisk Extreme Event Solutions business. Increasing property exposure in hazardous areas is a contributing factor to increased insured losses, and climate change accounts for approximately 1% of annual loss growth, with increased exposure and inflation being the main contributors.

Globally, nearly 58% of cities with a population of at least 300,000 are highly exposed to one or more natural hazards.

“Changing exposure patterns and rising repair costs are causing insurers to regularly reassess their exposures, particularly during periods of high inflation and in urban and coastal areas that are most vulnerable to natural hazards,” the report said .

Modeled global losses with a 100-year return period show an increase almost every year since this report was first published in 2012, and climate change is expected to increase the frequency and intensity of catastrophic weather events, it says the report.

Verisk suggests that AAL will increase by at least 1% year-on-year for each of the hazards presented in the report due to climate change.

While the largest event is anticipated to be produced by a hurricane or earthquake, severe convective storms, extratropical storms, wildfires and flooding represent a significant portion of the risk. According to the report, these hazards represent slightly more than half of the modeled (unharvested) AAL of $119 billion.

The report shows that the insured share of economic losses from natural disasters varies widely by region.

“In North America, for example, about 51% of economic losses from natural disasters are insured, while in Asia and Latin America, insured losses represent only about 12% and 24% of economic losses, respectively, reflecting very low insurance coverage. penetration into these regions. The portion of economic losses that are insured also varies significantly by peril,” the report said.