Global insured property losses from disasters were $31 billion in the first half of 2020, up from $23 billion during the same period last year, according to Swiss Re Institute’s preliminary sigma estimates.
Natural catastrophes accounted for $28 billion of H1’s insured losses – most resulting from secondary perils’ events – compared with $19 billion reported in H1 2019, said Swiss Re. Secondary perils are the smaller to mid-sized events, or secondary effects, which follow a primary peril. Secondary effects of a primary peril might be hurricane-induced flooding, storm surges, tsunamis, and fire following an earthquake.
On the other hand, insured losses from manmade disasters decreased to $3 billion from $4 billion in H1 2019. Swiss Re said the drop in man-made disasters was due in part to the COVID-19 pandemic “with lockdowns across the world bringing economic activity in many countries to a near halt.”
Global economic losses from natural catastrophes and man-made disasters in the first half of 2020 were $75 billion, which is up from $57 billion reported for the same period last year, but well below the average first-half economic loss of $112 billion reported during the past 10 years.
Breaking down the overall total for economic losses, Swiss Re said, natural catastrophes accounted for $72 billion during the first half, up from $52 billion in the same period in 2019. The remaining $3 billion of economic losses were caused by man-made disasters, down from $5 billion for the first half of 2019. (Economic losses include insured and non-insured losses).
Of the overall economic costs ($75 billion), around 40%, or $31 billion, were covered by insurance. During the previous 10 years, insured claims during the first half averaged $36 billion.
“Around 60% of natural catastrophe losses in the first half of 2020 were uninsured. As the severity of secondary perils will likely increase in the coming years, the importance of the insurance industry in closing natural catastrophe protection gaps is very clear. Climate change is a systemic risk and unlike COVID-19 it doesn’t have an expiry date”, said Jerome Jean Haegeli, Swiss Re Group Chief Economist.
The main driver of the first half losses were secondary perils, said Swiss Re, noting that in North America, severe convective storms (or thunderstorms with tornadoes, floods and hail) caused insured losses of more than $21 billion. The report said this was the highest since the first half of 2011 when losses from this peril alone were around $30 billion.
In June, sigma added, Calgary in Canada suffered losses of $1 billion from hail damage, the costliest hailstorm event on record in Canada.
Starting from May, heavy rainfalls caused severe flooding – another example of a secondary peril – in several provinces along the Yangtze River in China, said sigma.
Though not counted in the first half preliminary estimates, the current ongoing fires in southern California are a reminder of “the ever-present danger that fire presents,” said the report, noting that, in the future, climate change and rising temperatures will likely exacerbate secondary perils, including wildfires.
“Once again, secondary perils caused most catastrophe losses in the first half of 2020. Climate change is expected to worsen and amplify the scale of secondary peril events and associated losses in the future”, said Martin Bertogg, head of Cat Perils in Swiss Re.
Other findings from the sigma report include:
- Northern Europe was hit by two consecutive, intense windstorms, Ciara and Dennis, in February. Strong wind and heavy rains caused flooding, power outages and transport disruption, causing combined insurance losses of more than $2 billion.
- Cyclone Amphan in the Bay of Bengal caused economic losses of $13 billion in May, which was the most destructive tropical cyclone to hit India. Insured losses are expected to be just a fraction of the total.
Source: Swiss Re’s sigma
*This story ran previously in our sister publication Insurance Journal.