The new normal: annual average nat cat loss now around $150bn

The annual average loss from global natural catastrophes from 2017 to 2024 has cost insurers $146bn, suggesting a ‘new normal’ approaching $150bn per year, according to Gallagher Re’s 2024 Natural Catastrophe and Climate Report. It says that there was a minimum of 60 individual billion-dollar economic loss events, the fifth-highest level ever recorded, and at least 30 of those were also billion-dollar insured loss events.

The report notes that in 2024, the estimated total direct economic costs from global natural perils were $417bn, of which the private insurance market and public insurance entities covered $154bn. The protection gap therefore stood at 63%, or $263bn.

The economic cost solely from weather and climate events in 2024, which excludes losses from earthquakes or other non-atmospheric-driven events, was an estimated $402bn, of which insurers covered an estimated $151bn. A record 21 events resulted in a multi-billion-dollar cost for the insurance industry: topping the previous record of 17 set in 2023 and 2020, says the report.

It adds that at least 41% of insured losses ($64bn) resulted from the severe convective storm (SCS) peril. SCS events in 2023 and 2024 have now cost global insurers $143bn, of which $120bn occurred in the US alone.

“While 2024 was not a record year for total loss costs, we are continuing to witness the ongoing influence of climate change on the behaviour of individual events and broader weather patterns. 2024 officially became the warmest year on record dating to 1850, and scientists believe it was the warmest year in the last 125,000 years,” states the report.

It adds: “One must understand that climate risk is not solely an issue for physical damage potential, however, and the non-physical implications are substantial. This may affect sectors such as real estate, agriculture, industry and manufacturing; as well as impacting health and retirement, and the long-term strategies of investors.”

According to Gallagher, the insurance industry maintains a critical role in addressing and working to mitigate climate risk, but it must be done collectively with other private and public market stakeholders, adding that for (re)insurers, annual loss volatility with some climate risk influence will play a key role in future premium costs.

“With each year, we continue to witness an increase in the severity and high-impact frequency of natural catastrophe events in expected, and increasingly unexpected, parts of the world,” said Steve Bowen, chief science officer, Gallagher Re. “While the (re)insurance industry remains in strong position to withstand these higher aggregated loss costs, we face a new growing reality. The complex challenges arising from these events is accelerating the need to better identify how physical and non-physical risk profiles are evolving. We must also recognise the various ways these risks are increasingly linked together.”