Catastrophes in the first half of the year have again highlighted insurance affordability issues, as building costs remain high and taxes add to pressures.

Aon’s latest Global Catastrophe Recap says Australia had an active tropical cyclone period in the half, with eight systems reaching at least category 3 intensity on the Saffir-Simpson scale and four named storms making landfall.

Cyclone Alfred was the worst catastrophe, reaching heavily populated southeast Queensland in March. The Insurance Council of Australia has estimated losses from Alfred at $1.36 billion, and first-half catastrophe losses overall at more than $1.8 billion.

Alfred was Australia’s fourth most expensive cyclone on a normalised basis, behind Yasi in 2011, Debbie in 2017 and Gabrielle in 2023, Aon says.

The broker’s report says cyclone activity and severity in the half amplified the financial challenges facing Australia’s insurance sector.

The increasing cost of construction is a major concern, state-based taxes and levies are affecting cover affordability and cyclone reinsurance pool benefits are limited.

“While the pool goes some way to reduce premiums for those exposed policyholders, a significant proportion of natural hazard risk in northern Australia (not related to cyclones) is not covered by the pool and so affordability pressures remain.”

Aon notes Alfred may point to worrying trends in future, despite climate projections suggesting cyclone frequency will continue to decline.  

“These projections come with significant uncertainty due to several offsetting factors, including a southward shift in cyclone tracks or slower cyclone movement, both of which can enhance damage potential, especially in high-populated regions like Brisbane and Gold Coast.”

Worldwide, insured losses from January to June are expected to be at least $US100 billion ($150 billion), a figure topped only by 2011’s $US140 billion ($210 billion).

US events drove insured losses in the half, as the California wildfires and the continuing trend for high levels of damage from severe convective storms took a toll.

The storms, including two record-setting events in March and May, caused $US44 billion ($68 billion) in insured losses.

“As severe convective storm-related impacts continue to increase year after year, better research into building resilience is vital for insurers to adequately manage their risk and mitigate future losses,” Aon says.

At least 19 events – all in the US aside from European storms in June – passed $US1 billion ($1.5 billion) of insured losses.

Global economic losses due to natural disasters were preliminarily estimated at $US162 billion ($248.8 billion), about 15% higher than the long-term mean since 2000.

The global insurance protection gap was provisionally estimated at 38%, the lowest first-half value on record and well down on the average this century of 69%, given the dominant contribution of events in the US where penetration is relatively high.  

The highest uninsured loss occurred in Myanmar and neighbouring countries, where insurers covered less than $US100 million ($154 million) from total economic damage of $US12 billion ($18.4 billion) caused by the devastating earthquake in March.

Aon says the year-to-date total for insured losses already places 2025 in the top 11 years, and more catastrophes in the second half will probably put it higher.

Reinsurer attention in the second half is typically focused on the North Atlantic hurricane season. Colorado State University researchers anticipate eight hurricanes this season, with three expected to reach major strength.

Mid-year reinsurance renewals showed improved conditions for buyers, despite the active catastrophe environment, providing relief after the higher pricing and tougher terms of recent years.

Focus will soon turn to messaging from the annual Reinsurance Rendezvous in September in Monte Carlo, as affordability and availability challenges in regions including Australia remain a key issue for the industry.

From the latest Insurance News magazine: Find out just how close the east coast came to disaster when Cyclone Alfred swept ashore