The costs of natural catastrophes and man-made disasters in the first half of the year increased compared the figure for the same period of 2019, however they are still well below the ten-year average.
Swiss Re Institute’s preliminary sigma estimate put the global economic costs of natural and manmade disasters at $75 billion an increase from $57 billion for the same period last year. The figure is well below the average of $112 billion for first-half economic losses of the previous 10 years.
The estimate found that what were deemed secondary perils were the major drivers of losses in the period.
In North America, severe convective storms (thunderstorms with tornadoes, floods and hail) caused insured losses of over $21 billion in the first half. This was the highest since the first half of 2011, when losses from this peril alone were around $30 billion. In June, Calgary in Canada suffered losses of $1 billion from hail damage, the costliest hailstorm event ever in Canada.
Starting in May, heavy rainfalls caused severe flooding in several provinces along the Yangtze River in China.
Losses from fire events were significant and began at the start of the year given the still burning 2019/2020 fire season in Australia, the longest (from September 2019 to February 2020) and most destructive ever. Arctic Siberia suffered extensive wildfires as exceptionally high temperatures and dry weather provided the ideal conditions for large-scale burning.
Though not counted in the first half preliminary estimates, the current ongoing fires in southern California are a clear and current reminder of the threat said Sigma. It added climate change and rising temperatures will likely exacerbate secondary perils, including wildfires in the future.
“Once again, secondary perils caused most catastrophe losses in the first half of 2020. Climate change is expected to worsen and amplify the scale of secondary peril events and associated losses in the future”, said Martin Bertogg, Head of Cat Perils in Swiss Re.
Of the global economic losses, around 40% ($31 billion) were covered by insurance. In the previous 10 years, first-half insured claims averaged $36 billion annually. The catastrophe loss estimates are for property damage and exclude COVID-19 related claims. More than 2 000 people lost their lives or went missing in disaster events during the first half of this year.
Of the $75 billion in total global economic losses, natural catastrophes accounted for $72 billion, up from $52 billion in the year-earlier period. The remaining $3 billion of losses were caused by man-made disasters, down from $5 billion for the first half of 2019.
“This year’s decline was in part due to the COVID-19 pandemic, with lockdowns across the world bringing economic activity in many countries to a near halt,” added the report. “Global insured losses from natural catastrophes rose to $28 billion in the first half of 2020 from $19 billion the year before, while insured losses from man-made disasters decreased to $3 billion from $4 billion.
“Around 60% of natural catastrophe losses in the first half of 2020 were uninsured. As the severity of secondary perils will likely increase in the coming years, the importance of the insurance industry in closing natural catastrophe protection gaps is very clear. Climate change is a systemic risk and unlike COVID-19 it doesn’t have an expiry date”, said Jerome Jean Haegeli, Swiss Re Group Chief Economist.