A 360% rise in insured losses in the past 30 years from the increased frequency and intensity of natural disasters is leading to a hike in premiums, with some insurers exiting particularly high-risk areas, according to a new report from Bloomberg Intelligence.
Transition risks associated with the assets backing these liabilities is also putting pressure on carriers to cut coverage of polluting sectors in their investment portfolios.
Global insured losses from natural disasters in 2023 are estimated at US$118bn, well above the 2017-21 average of US$97bn, according to figures from Bloomberg Intelligence. It said more than half of the top 20 global reinsurers held or cut their nat cat exposure in the January 2023 renewals.
Grace Osborne, Bloomberg Intelligence ESG analyst, commented: “A repricing of climate risks has seen global property catastrophe-reinsurance rates rise by as much as 30% at the start of 2024. Rising premiums have served to improve loss ratios (total losses paid by insurers plus adjusted expenses over total earned premiums), despite increased insured losses, only Allstate and Renaissance Re seeing a rise in loss ratios in 2000-22. However, if the rate of increases continues consumer appetite to shift climate risk to insurers could decline.
“Increased frequency of climatic events has exposed insurers to more risk as reinsurers are reducing their exposure to secondary peril events by raising the loss threshold for reinsurance to kick in. Smaller, more frequent events, such as the 25 severe convective storms last year, are therefore creating balance sheet attrition volatility for insurers.”
