Natural disasters "flood" the economy - Damages could reach $145 billion in 2025
According to a new analysis from the Swiss Re Institute, global natural catastrophe insurance losses could reach $145 billion this year, largely driven by "secondary perils" such as floods, fires and severe storms.
This follows a long-term annual growth trend of five to seven percent, the institute said. The report said "primary hazards" such as earthquakes and hurricanes pose the greatest risks, potentially pushing insurance claims to more than $300 billion in a year when the events peak.
"The year 2025 began with wildfires in Los Angeles, causing an estimated $40 billion in insurance losses. While these secondary peril losses are significant, primary perils remain the biggest threat: when a major hurricane or strong earthquake hits a densely populated urban area, insurance losses that year can be more than double the long-term loss trend," the Swiss Re Institute said in a press release.
The last peak year was 2017, driven by hurricanes Irma, Harvey and Maria. The institute said peak years, caused by a few "primary hazard events" or an accumulation of them and "secondary hazard events," should not be viewed as an anomaly.
Since 2017, fundamental risks have steadily increased, along with population growth, economic expansion, and urban sprawl, including in places vulnerable to natural disasters.
"Our latest analysis of over 200 internal models and the trend of losses 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 many insured buildings, insurance losses can easily reach $300 billion in that year," said Swiss Re official sources.
The institute's estimates have found that some hurricanes from the early 20th century would result in losses of more than $100 billion if they struck today. Hurricane Andrew, for example, caused $35 billion in damages to insureds in 1992. Today, a hurricane on the same path would result in almost three times the losses due to economic and population growth, as well as urban sprawl.
Although the severity of claims has increased globally, the United States accounted for almost 80 percent of the world's insurance losses last year due to its vulnerability to severe hurricanes, earthquakes, fires, storms and floods.
There are many factors that affect insurance rates, including inflation and local regulations. But in the long run, the main factor in determining the cost of rates and claims is exposure to natural hazards.
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