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Industry faces $137 billion in natural catastrophe losses

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Insured losses from natural catastrophes are projected to exceed $US100 billion ($137.5 billion) this year, making it the fourth-costliest 12 months on record for the insurance industry after 2005, 2011 and 2017, according to Swiss Re.

The reinsurer made the forecasts in its latest Sigma study, saying “above-average” catastrophe activities such as Hurricane Ida in August and the floods in Europe in the northern hemisphere summer are fuelling the losses.

Ida and the resulting sub-perils it caused including inland flood damage led to insured losses of about $US28-30 billion ($38.5-41.2 billion) as of October 29, and the Europe floods in July – the costliest in European records as tracked by Sigma – have caused nearly $US12 billion ($16.6 billion) in losses for the industry.

Swiss Re says it expects flood risk to worsen as climate change accelerates, particularly pluvial flood from both thunderstorms and tropical cyclones.

“Most climate models project that the extreme precipitation events that cause floods will become more intense as rising temperatures lead to more moisture in the atmosphere,” the Sigma study said.

The above-average catastrophe losses this year will support property-catastrophe prices next year.

Sigma says global insurance premiums – for non-life and life – are expected to grow 3.4% in real terms this year, 3.3% next year and 3.1% in 2023.

The combined life and non-life insurance market globally, as measured by premiums, will exceed $US7 trillion ($9.6 trillion) by the middle of next year – earlier than expected.

Non-life premiums will grow 3.3% this year and 3.7% next year before easing to 3.3% in 2023.

“Insurance sector profitability has come under pressure in 2021, as the industry absorbs COVID-19-related claims, above-average catastrophe losses and high inflation,” the Sigma study said.

“We expect a strong rebound from 2022.”

Click here download the report.