Swiss Re highlights growing catastrophe protection gap as nat cat losses rise 5-7% annually

Reinsurance giant Swiss Re has highlighted how growing natural catastrophe risk remains a significant driver of reinsurance demand, as insured nat cat losses continue to follow a 5–7% annual growth rate, driven by increasing exposures, rising asset values and changing hazard patterns.

Crucially, this rise in societal exposure underscores an expanding catastrophe protection gap, as well as a growing need for broader risk transfer solutions.

At the 68th annual meeting of the reinsurance industry in Monte Carlo, Swiss Re shared that its modelling indicates that insured losses could reach around US $320 billion in a 2026 peak loss scenario, which clearly demonstrates the value of reinsurance protection against low-frequency, high-severity events.

“Today, a cluster of hurricanes, such as Harvey, Irma and Maria (2017), can push annual insured losses above USD 120 billion, even without a single record-breaking event,” Swiss Re explained.

“The 2026 European wildfire season is one example of how natural catastrophe risks are evolving. Wildfire is the fastest-growing weather peril globally, including in Europe, where insured wildfire losses have increased by an estimated 8–11% annually over recent decades.”

The reinsurer added that better data, modelling, prevention and adaptation can help improve understanding of these changing risks and support more effective risk transfer.

This widening protection gap is where re/insurers can turn towards the insurance-linked securities market. By channeling capital directly from institutional investors via instruments like catastrophe bonds and collateralized reinsurance sidecars, the ILS market provides an influx of alternative capacity required to absorb losses that are generated from these nat cat risks.

Urs Baertschi, Chief Executive Officer Property & Casualty Reinsurance at Swiss Re, commented: “The underlying need for protection continues to grow as the risk landscape evolves and becomes more interconnected. Our clients need more than reinsurance capacity from us – they need risk expertise, data and solutions that help them navigate an increasingly complex environment. We combine these capabilities to help our clients understand emerging exposures, manage volatility and build resilience.”

In addition, Swiss Re emphasised that it believes AI infrastructure investments can create further opportunities for risk transfer.

A recent report released by Swiss Re Institute indicated that AI data centres and renewable energy infrastructure alone could generate around $200 billion in insurance premiums between 2026 and 2030, and how this opportunity also creates a clear role for alternative reinsurance capital, particularly in catastrophe bonds and sidecars.

“According to Swiss Re Institute, around 40% of US data centre capacity is located in significant-to-very-high tornado day zones. As data centres grow in size and relevance, their risk profile is also becoming more complex. High asset values combined with dependencies on electricity grids, water, technology supply chains and digital infrastructure create potential concentrations across individual sites and wider networks,” Swiss Re explained.

Furthermore, Swiss Re has also urged for underwriting discipline to be maintained in US liability risk, as commercial liability losses reached $174 billion in 2025, exceeding the global insured natural catastrophe losses of $120 billion in the same year.

“The trend for elevated verdicts remains, while the broader litigation environment creates uncertainty around future claims severity. For re/insurers, these trends reinforce the importance of a continued focus on claims trends, legal developments, and careful risk selection,” Swiss Re noted.

Gianfranco Lot, Chief Underwriting Officer Property & Casualty Reinsurance at Swiss Re, said: “As risks become more complex, underwriting increasingly depends on understanding how exposures interact and where concentrations can develop. Our data, modelling and risk expertise help us identify accumulations, price risk appropriately and make portfolio decisions that support clients as established risks evolve and new ones emerge.”