Swiss Re has warned of a “steep upward trajectory” in insured losses from natural catastrophes as exposure values rise due to urbanisation, inflation and climate change.

This year, the industry is expected to take a hit of about $US145 billion ($226.5 billion) from floods, storms and other natural perils, the reinsurer’s Swiss Re Institute says.

Last year, insured losses totalled $US137 billion ($214 billion), marking the fifth straight year above $US100 billion ($156.2 billion), it adds in its latest Sigma report.

But the institute says that in a fast-evolving risk landscape, the $US100 billion benchmark is no longer relevant.

“Rather, the benchmark is the annual 5%-7% increase in insured losses, which on its own implies average loss outcomes will continue to rise. The main driver keeping insured losses on a steep upward trajectory is rising exposure values as a result of economic growth and expanding populations, often in regions susceptible to severe weather conditions.

“Urbanisation is leading to denser urban areas and higher concentration of more valuable assets at risk that need insuring. At the same time, inflation pressure, including in construction costs, is driving exposure values even higher and makes rebuild more expensive.

“In addition, observed climate change effects are also playing a role in compounding losses for some perils and regions.”

The institute says its $US145 billion projection for this year is based on the 5%-7% long-term growth trend.

Reviewing last year’s catastrophe losses, it says the biggest contributors were hurricanes Helene and Milton, severe convective storms in the US, large urban floods around the world and record natural catastrophe insured losses in Canada.

“Though higher than in 2023, last year’s insured losses could have been worse. In the absence of a major primary peril event (namely an earthquake or a big tropical cyclone loss), the 2024 loss total was not exceptional.

“Secondary perils made the biggest contribution to global losses … In recent years, the pattern has been that secondary perils have contributed more to annual insured losses than have primary perils. However, primary perils still hold the largest loss potential.”

Examples of primary perils include severe hurricanes and strong earthquakes.

Swiss Re head of catastrophe perils Balz Grollimund said: “Our recent analysis of over 200 in-house models and the loss trend over the past 30 years show what is at stake: when a severe hurricane or a major earthquake hits an urban area in a country with significant insurance take-up, insured losses could easily reach $US300 billion ($468.6 billion) in that year.”