Record Insured Losses Predicted as Climate Change Intensifies Extreme Weather

In 2024, insured losses from natural disasters hit a record $140 billion, the highest since 2017, driven primarily by hurricanes and flooding. Climate change is increasingly influencing the frequency and severity of such events, leading more insurers to reconsider coverage in high-risk regions. The overall economic impact of disasters reached $320 billion, coupled with significant loss of life.

Insured losses from natural disasters reached a staggering $140 billion in 2024, marking the highest figure since 2017 and significantly surpassing the 30-year average. The hurricanes Milton and Helene emerged as the most catastrophic events, causing $25 billion and $16 billion in losses, respectively. Concurrently, extreme flooding incidents in Dubai and Spain’s Valencia region compounded the financial toll, with over 200 fatalities reported.

The onset of 2025 is already witnessing destructive wildfires in the Los Angeles area, projected to incur unprecedented financial damages. The persistent uptick in natural disasters aligns closely with escalating global temperatures, which set records in the past year. According to the European Union’s Copernicus Climate Change Service, November 2024 recorded a global average temperature of 1.62C beyond pre-industrial levels, exceeding the pivotal threshold of 1.5C.

In an interview, Tobias Grimm, the chief climate scientist at Munich Re, emphasized the undeniable link between climate change and the increasing frequency of severe weather. He pointed out, “Science has become more certain that climate change plays a crucial role in making weather disasters more frequent and more extreme.” This shift has resulted in atypical weather patterns, with regions like Dubai, traditionally not associated with flooding, experiencing severe weather events.

Grimm elaborated that heightened temperatures have precipitated a rise in intense rainfall and a higher occurrence of rapidly intensifying tropical cyclones. The overall damages from natural disasters in 2024 reached $320 billion, the highest since 2021, with weather-related catastrophes accounting for 93% of total damages and 97% of insured losses, tragically resulting in approximately 11,000 deaths.

In response to the increasing frequency of extreme weather, insurers have begun withdrawing from high-risk areas. However, Grimm asserted that adequate premiums allow for insuring any risks, stating, “Every risk can be insured if you get the right premiums.” Munich Re does not typically exclude regions from coverage due to climate change risks, maintaining an proactive approach to catastrophe insurance.

The article outlines the significant rise in insured losses attributable to natural catastrophes, correlating it with climate change impacts. With the global temperature surging and last year being recorded as the hottest, weather patterns have become unpredictable. Natural disasters are increasing in their frequency and severity, prompting insurers to reconsider their risk assessment. As extreme weather events, like hurricanes and flooding, become more common, the insurance landscape alters in response to these emerging threats.

In conclusion, the rising trend of insured losses from natural disasters underscores the urgent impact of climate change on weather patterns globally. Hurricane Milton and Helene represent just two examples of how extreme weather has triggered immense financial losses, with a pressing human toll. As insurers adapt to these changes, proactive strategies remain crucial in mitigating risk and ensuring adequate coverage in an unpredictable climate.

Original Source: www.bnnbloomberg.ca