Average insured cat loss expectation reaches $151bn high: Verisk

Insured nat cat losses are now set to average $151bn a year, according to Verisk’s Extreme Event Solutions business, with the number up 13.5% on the firm’s annual expectation of $133bn from just last year.

The predicted average annual loss (AAL) figure is $119bn excluding crop losses. Verisk expects average annual exposure growth of 7.2%, including a rise in property replacement values from new construction and inflation across modelled countries.

“While actual annual insured losses over the past five years have been high, averaging $106bn, they should not be seen as outliers,” said Rob Newbold, president of Verisk Extreme Event Solutions. “Our models show the insurance industry should be prepared to experience total annual insured losses from natural catastrophes of $151bn on average, and well over that in large loss years.”

Annual insured losses from natural catastrophes have averaged $106bn over the last five years, according to Verisk Extreme Event Solutions, which was formerly AIR Worldwide. This compares with less than $83bn in the preceding five-year period.

Verisk said the rise in global insured natural catastrophe losses is being driven by several key factors. These include rapid urban expansion and exposure growth, the impacts of climate change and variability, as well as the increasing frequency of events coupled with economic and social inflation.

The research from Verisk’s 2024 Global Modeled Catastrophe Losses Report also finds that climate change currently only accounts for about 1% of the annual increases in insured losses. But the report stresses that detecting climate change’s signal can be challenging due to natural variability and changes in exposure and inflation.

“Climate change affects all atmospheric perils, but currently only accounts for approximately one percent of the annual increase in losses. Nonetheless, its influence is expected to become more significant over the next few decades,” said Dr Jay Guin, executive vice-president and chief research officer for Verisk Extreme Event Solutions. “This is a signal that the insurance industry needs to be proactive and utilise advanced, forward-looking models to better estimate risk and guide internal decision making.”