The insurance industry should be prepared to experience total annual insured losses, from natural catastrophes and crop, of well more than $151bn on average, says Verisk, a New Jersey-headquartered global data analytics and risk assessment company.
In a white paper titled “Verisk 2024 Global Modelled Catastrophe Losses”, Verisk indicates that its latest models show the global modelled insured average annual loss (AAL) from natural catastrophes already estimated at $151bn for 2024, with non-crop losses making up more than three-quarters of this figure at $119bn.
Asia is estimated to account for 16% or $24.4bn of the $151.1bn global insured AAL in 2024.
Verisk says that in the past five years, the actual annual insured losses from natural catastrophes averaged $106bn, compared with less than $83bn in the preceding five-year period. Verisk’s latest.
Breakdown of contribution to global AAL by region and key aggregate EP metrics by region
|
Region
|
Aggregate Insured Loss ($ bn)
|
|
AAL
|
1.0% (100-year return period)
|
0.4% (250-year return period)
|
|
Asia
|
24.4
|
71.0
|
91.5
|
|
Europe
|
19.7
|
79.2
|
105.4
|
|
Latin America
|
6.3
|
56.3
|
85.5
|
|
North America
|
96.9
|
333.7
|
415.1
|
|
Oceania
|
3.7
|
24.7
|
37.4
|
|
All exposed areas
|
151.1
|
400.0
|
482.2
|
|
Average annual loss (AAL) and exceedance probability (EP) metrics, by region, based on Verisk’s global suite of models, including those introduced or updated in 2024 (Source: Verisk)
|
On a regional basis, the insured percentage of economic loss from natural disasters varies considerably. In North America, for example, about 51% of the economic loss from natural disasters is insured, while in Asia and Latin America, insured losses account for only about 12% and 24% of economic losses, respectively, reflecting the very low insurance penetration in these regions.
Hurricanes and quakes
The report says that the risks posed by hurricanes and earthquakes should not be overlooked. Recent seismic activity serves as a stark reminder of the destructive potential of these perils, which can cause catastrophic damage with little or no warning. For instance, a recent earthquake in Japan prompted the issuance of the country’s first-ever “megaquake” advisory. Similarly, an earthquake near Los Angeles has heightened concerns about the possibility of a larger, more destructive quake in the complex fault systems underlying southern California and the Los Angeles basin.
Although the largest single event is anticipated from a hurricane or an earthquake, severe convective storms, extratropical storms, wildfires, and floods are a significant part of the risk, accounting for a little more than half of the $119bn modelled (non-crop) AAL.
Climate change
In addition, climate change affects all atmospheric perils, including tropical cyclones, but its impact is more immediate and pronounced on wildfire, flood, and severe thunderstorms. Currently, climate change accounts for approximately 1% of the annual increase in losses, with exposure growth and inflation being the main contributors. Nonetheless, its influence is expected to become more significant over the next few decades. Verisk says that the insurance industry needs to be proactive and utilise advanced, forward-looking models to better estimate risk and guide internal decision-making.