Climate change drove heavy nat cat losses of $120bn in 2022: Munich Re

Insured losses from natural disasters were “significantly” above the five-year average in 2022 at $120bn, with half coming from Hurricane Ian, according to estimates from Munich Re. The reinsurer said climate change and the third year of La Niña conditions were behind the increase in natural disaster losses in 2022. Last year’s insured losses matched the total for 2021 and exceeded the five-year average of $97bn, Munich Re’s figure show. Total economic losses from natural disasters were down from the record $320bn set in 2021 at $270bn and close to the five-year average. Swiss Re estimated in December that insured losses from natural disasters reached $115bn in 2022. Munich Re’s chief climate scientist Ernst Rauch explained that La Niña conditions increase the likelihood of hurricanes in North America, floods in Australia, drought and heatwaves in China, and heavier monsoon rains in parts of South Asia. “At the same time, climate change is tending to increase weather extremes, with the result that the effects sometimes complement each other,” Rauch explained. Thomas Blunck, member of the board of management at Munich Re, said “climate change is taking an increasing toll”, with last year’s natural disasters more intense and/or more frequent. “Another alarming aspect we witness time and again is that natural disasters hit people in poorer countries especially hard. Prevention and financial protection, for example in the form of insurance, must therefore be given higher priority,” Blunck added. Hurricane Ian, the second-costliest ever tropical cyclone for insurers behind Katrina in 2005, fits with research on climate change predictions, Munich Re said. “Most researchers do not expect an increase in the overall number of tropical cyclones as a result of global warming. However, they do anticipate a rise in the proportion of particularly severe cyclones with exceptionally heavy rainfall,” it explained. Flooding in southeast Australia was the second costliest natural disaster for insurers in 2022. Floods in February and March cost insurers just short of $4bn but this rose to $4.7bn after further flooding later in the year. “Natural cycles play an important role in Australian flood risk, as torrential rainfall is much more likely during La Niña years,” Munich Re explained. “However, researchers now believe that climate change is additionally influencing the intensity of the rainfall. The same is true for bushfires and heatwaves, which tend to occur in El Niño years, the opposite phase to La Niña,” it said. Severe convective storms in the US cost insurers $23bn in 2022, above the average of $17bn for the past five years. Europe recorded extreme heat and drought conditions last year, which caused wildfires to burn areas two and half times greater than the annual average over the past 15 years, according to Munich Re. Heavy hailstorms followed, in line with climate change science, which caused billions of losses in Spain and France. Last year also recorded extratropical cyclones with winter storms returning to Europe after several quieter years, costing insurers $4.3bn. Severe flooding in Pakistan in August became the second-costliest economic disaster in 2022 at $15bn and loss of at least 1,700 lives, but Munich Re said almost none of the loss was insured. “Researchers estimate that the intensity of an event of this kind has already increased by half because of climate change, compared to a world without global warming, and that it will continue to rise in future,” Munich Re said. Rauch concluded that “better prevention and early warning systems must contribute to improving protection for people”. “In addition, the Loss and Damage Fund agreed at the COP27 climate summit in Egypt and the Global Shield initiative presented there need to be promptly implemented as viable instruments. Also, binding, regulated compensation payments can help protect more people against the immediate financial consequences of disasters,” he said.

Climate change drove heavy nat cat losses of $120bn in 2022: Munich Re

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