In 2021, 306 natural catastrophes plunged the world into USD 270 bn economic losses and insured loss of USD 111bn and man made catastrophe insured losses, USD 8bn.
It strikes that losses from flood were dominant, creating a pin point reference to climate change and this has been on an upward trend globally. Record show that in 2021, there were more than 50 severe flood events around the world, resulting in combined economic losses of more than $80bn.
Insured losses were “just” USD 20bn, further evidence of what has for many years been a large protection gap. Group Chief Economist, Swiss Re Jerome Jean Haegeli said, “Growing losses from floods are becoming ever more apparent. Together the public sector and re/insurers can steer development away from high-risk areas and investments into protective measures such as green infrastructure. This will keep assets insurable.”
Swiss Re Institute data disclosed that the a rise in insured losses has maintained a long-term trend (based on 10 year moving averages) of 5-7% growth. The moving trend was captured by the Institute, “Once again, secondary perils, including floods, were at the forefront, accounting for more than 70% of all insured losses. It was the first year ever that two separate secondary perils events – winter storm Uri in the US and the flood in western/central Europe in July – each caused in excess of USD 10bn.
According to the report, there has been an upturn in flood insured losses over the last 20 years, cumulatively amounting to close to USD 140 bn since 2001. The costliest event to date remains the 2011 floods in Thailand, which led to insured losses of USD 18bn (in 2021 prices). The main driver of rising flood the Institute said, has been exposure accumulation due to economic growth and urbanisation.
However, this report adds that many other factors such as aging or lack of flood control infrastructure, “soul sealing” in urban areas, more rainfall from tropical cyclones and climate change effects also impact loss outcomes.
Martin Bertogg, Head Cat Perils, Cyber& Geo, Swiss Re Institute, reiterated this, “Floods affect nearly a third of the world population, more than any other peril. Given the scale of devastation, flood risk deserves the same attention and risk assessment rigours as primary perils such as hurricanes.”
The report noted that events like the Thailand flood in 2021 and last year’s summer flood in Europe demonstrate that the loss potential from single flood events today can equal and even exceed losses from primary peril events. Given the frequency of severe flood events and growing magnitude of large associated losses, it is incumbent on the insurance industry to increase the financial resilience of households, businesses and communities.