According to Munich Re, the economic cost of natural disasters in the first half of 2023 was $110 billion, with insurers bearing an estimated $43 billion of that total.
In a report released on July 27, the reinsurer noted that the insured losses were lower than the US$47 billion reported for the same period last year but higher than the US$34 billion 10-year average for half-year losses.
Economic losses during H1 2023 were also lower than H1 2022’s reported US$120 billion but still higher than the 10-year average of US$98 billion (inflation-adjusted), according to the report titled “Earthquakes, thunderstorms, and floods: Natural disaster figures for the first half of 2023.”
Insurance broker Aon released a separate analysis on global insured catastrophe losses for H1 2018, estimating $53 billion in damages and economic losses of $194 billion. The global economic damages of $194 billion were much higher than the 21st century average of $128 billion, the fifth largest on record, and the highest since 2011. This information comes from Aon’s research titled “Global Catastrophe Recap: First Half of 2023.” (Both insured and uninsured losses are counted toward the total economic losses).
According to Munich Re and Aon, the worst economic losses were caused by the earthquake that hit Turkey and Syria in early February. According to Munich Re’s calculations, the entire cost is closer to $40 billion, with Syria responsible for about $5 billion. However, only about $5 billion of those losses are covered by insurance. However, Aon indicated that the earthquake that occurred between Turkey and Syria was responsible for more than half of the $5.6 billion in insured losses (when governmental and private insurance schemes were taken into account) of the projected $91 billion in economic damages.
According to Aon, there were at least 25 separate billion-dollar economic loss occurrences in H1 2023, with the vast majority of them being caused by natural disasters (17 in the US, 4 in APAC, 3 in EMEA, and 1 in the Americas).
According to Aon, severe convective storm activity in the United States was the primary driver of global insured losses, with eight multi-billion dollar catastrophes, however the February earthquakes in Turkey and Syria were the costliest insured event ($5.6 billion and above). On the other hand, Munich Re reports that a series of thunderstorms in the middle of June accounted for almost $7 billion in insured losses during the first half of the year.
Lack of Adequate Insurance
“Less than 40% of overall losses in the first half of the year were insured – evidence of the large insurance gap that persists in many countries for multiple natural hazards,” said Munich Re’s report, adding that insurers bore around 35% of worldwide losses in terms of the average half-year losses in the period 2013-2022.
But Aon found that only 27% of economic losses were covered by insurance this year.
Severe Storms Strike the U.S.
The Munich Re research went on to say that around one-third of global losses were caused by many rounds of extreme thunderstorms in the United States.
More than 95% of SCS losses occurred in the United States, according to data compiled by Aon, making severe convective storms the most expensive natural disaster in history. To quote the report, “in the first half of 2023, U.S. SCS activity was responsible for at least 13 individual billion-dollar events and $35 billion in total preliminary insured losses, setting a new H1 record.”
The total amount of money lost due to these extreme weather events was over US$35 billion, and insurance paid out over US$25 billion of it. Munich Re noted that losses of this magnitude were no longer anomalies due to severe thunderstorms in the United States. The only other time that first-half thunderstorm losses were larger in the United States was in 2011 (with US$46 billion in overall losses and US$29 billion in insured losses), and that was before inflation was taken into account.
The Munich Re report stated that the most expensive event of the year thus far was a string of thunderstorms in the middle of June that impacted large parts of Texas, with squalls and hailstones measuring up to 12 centimeters in diameter causing the most serious damage with more than 50 tornadoes recorded. The total projected loss from this outbreak is over $8.4 billion, of which about $7 billion was covered by insurance.
Hurricanes in the Caribbean
According to Munich Re, the high insurance penetration for thunderstorm losses in North America (including the United States and Canada) amounts to $42 billion, of which about US$32 billion was insured. North America’s disproportionate share of global losses can be attributed, in part, to the exceptional severe thunderstorms that hit the United States in the first half of the year.
Smoke from the extreme wildfires in Nova Scotia, northeastern Canada, captured international attention when it drifted across large portions of the eastern United States. However, according to Munich Re, the fires hit relatively sparsely populated regions, which “helped keep direct losses within reasonable limits” and resulted in no major losses for insurers.
Quakes and Floods Strike Europe
The earthquake catastrophe in Turkey accounted for a disproportionately large share of European losses in the first half of 2023. Of the total estimated losses of $59 billion (€48 billion), only about $7 billion (€6.7 billion) was recovered. (Just a reminder: the full economic price tag for the Turkey-Syria earthquake was US$40 billion with insurance covering about US$5 billion of that amount).
High losses were also caused by catastrophic flooding in northeastern Italy and other nations.
After two years of drought, the northern Italian region of Emilia-Romagna received numerous episodes of heavy rainfall in May, leading to the flooding of as many as 23 rivers. “An analysis of the event concluded that there was a 1-in-200-year probability of such prolonged heavy rainfall in the affected region,” the report stated.
Munich Re estimated total damages from the floods at around US$10 billion (€9 billion), with insurers paying out only US$1.1 billion (€1 billion), noting the high degree of urbanization as a contributing factor. The paper highlighted that, like many other nations, Italy’s insurance penetration is low because flood risk is not included in regular building insurance.
Disasters in Asia and the Pacific
Munich Re estimates that natural disasters in the Asia-Pacific region cost the region’s economy about US$7 billion, of which about US$3 billion was covered. The landfall of Cyclone Gabrielle and subsequent flooding caused significant losses in New Zealand, according to the study; the destruction of assets was estimated at US$4.3 billion, of which US$2.9 billion was insured.
“Within a span of three weeks in the first quarter of 2023, the North Island of New Zealand was hit by two consecutive, billion-dollar disasters: the aftereffects of Cyclone Gabriele and catastrophic flooding in Auckland. According to Aon’s analysis, these disasters were the fifth and sixth most expensive in terms of insured losses in New Zealand, behind only the earthquakes of 2010, 2011, and 2016.
After originating in the northern part of Australia in early February and making its way across the whole Indian Ocean, Munich Re stated that Cyclone Freddy was likely the longest active tropical cyclone since records began. Numerous lives were lost as a result of it in Mozambique and other parts of southeastern Africa. Munich Re estimated that the total damages in Mozambique and its neighbors amounted to about US$1.5 billion, but that only a fraction of those losses were covered by insurance because insurance coverage is so low in low-income nations.
Source: Munich Re and Aon