The insurance and reinsurance industry faced above average catastrophe losses from across the globe in the first-half of 2022, with the total coming to $39 billion, some 18% above the average, according to data from Aon.
The latest global catastrophe recap report from insurance and reinsurance broker Aon also shows that the protection gap was around 57%, as more than half of all economic losses suffered from natural catastrophe events were not covered by insurance.
The first half of 2022 was charcterised by large-scale disasters on nearly every continent of the planet, leading to another period of above-average losses for the insurance industry, Aon explained.
In addition, Aon highlights in its new report the complexities re/insurers faced this year, including higher replacement costs and reinsurance placements, which have been influenced by societal and financial factors, most notably the war in Ukraine and the highest rates of inflation seen in decades.
In addition, Aon highlighted the influence of the climate, with “the fingerprints of climate change” continuing to become more evident in catastrophe event behavior, as well as longer-term temperature and precipitation trends in H1 2022.
In particular, La Niña conditions which have been ongoing for nearly three consecutive years influenced weather patterns and drove catastrophe losses to the insurance market, while inflationary effects are expected to add additional costs to supply and labour, which combined with increasingly impactful disasters could elevate losses through the second-half.
Global economic losses from natural disasters were actually 24% below average in H1, at $92 billion, but insured losses were still above on the back of persistent severe convective storm activity in the United States and Europe, Aon said.
Interestingly and perhaps harking back to the inflationary and global macro factors cited, Aon cautions that “further loss development, at a perhaps significant level, is anticipated in the coming months as the full industry impact from several large events are realized.”
Loss creep has been a growing issue for the insurance and reinsurance industry in recent years, as social inflationary factors, litigation and the complexity of events and recovery from them, have all combined to elevate claims inflation and as a result loss amplification.
During the first-half of 2022, Aon counted 9 separate billion-dollar insured catastrophe loss events, all but one of which were weather related.
The broker also noted that at least 20 catastrophe events were recorded with at least $500 million of insured losses, which is tied with 2011 as the second highest H1 total this century, falling only behind 2020’s 24.
Roughly 48% of the $39 billion in first-half insured catastrophe losses came from the United States, reflecting the relatively costly start to the year that is expected for some re/insurers.