Climate change & La Niña drive 2022 natural disaster losses: Munich Re

• Natural disasters responsible for high losses across the world 
• Provisional estimates for overall losses approximately US$ 270bn, less than in extremely costly 2021
• Insured losses of around US$ 120bn similar to last year – again exceeding the US$ 100bn mark
• Hurricane Ian was by far the costliest natural disaster in 2022: roughly US$ 100bn in losses, of which some US$ 60bn was insured
• Devastating floods in parts of Asia and Australia, exacerbated by La Niña and climate change

Toronto, ON (Jan. 10, 2023) – With overall losses of around US$ 270bn (previous year US$ 320bn) and insured losses of roughly US$ 120bn (previous year US$ 120bn), 2022 joins the recent run of years with high losses. Overall losses were close to the average for the last five years, while insured losses were significantly above average (2017–2021: US$ 97bn). The continued high level of insured losses is impacting insurers at a time when they are having to deal with both high inflation rates and a shrinking capital base due to rising interest rates. In contrast, the positive effect on investments from higher interest rates will only come in time.

Climate change is taking an increasing toll. The natural disaster figures for 2022 are dominated by events that, according to the latest research findings, are more intense or are occurring more frequently. In some cases, both trends apply. Another alarming aspect we witness time and again is that natural disasters hit people in poorer countries especially hard. Prevention and financial protection, for example in the form of insurance, must therefore be given higher priority.
Thomas Blunck, Member of the Board of Management, Munich Re

“Two factors should be kept in mind when considering the 2022 natural disaster figures. Firstly, we are experiencing La Niña conditions for the third year in a row. This increases the likelihood of hurricanes in North America, floods in Australia, drought and heatwaves in China, and heavier monsoon rains in parts of South Asia. At the same time, climate change is tending to increase weather extremes, with the result that the effects sometimes complement each other”, explains Ernst Rauch, Chief Climate Scientist at Munich Re.

What were the worst natural disasters in 2022?

Hurricane Ian was responsible for more than one third of overall losses and for roughly half of insured losses worldwide. This powerful tropical cyclone made landfall on the west coast of Florida in September with wind speeds of almost 250 km/h (150 mph). Only four other storms on record have been stronger when making landfall on the US mainland, while some others were of a similar strength to Ian. According to provisional estimates, it caused overall losses of around US$ 100bn, of which US$ 60bn was insured (not including NFIP²). In terms of insured losses adjusted for inflation, Ian was the second-costliest tropical cyclone on record after Hurricane Katrina in 2005.

Severe storms like Ian fit in with the anticipated consequences of climate change: most researchers do not expect an increase in the overall number of tropical cyclones as a result of global warming. However, they do anticipate a rise in the proportion of particularly severe cyclones with exceptionally heavy rainfall.

The year’s second-costliest and greatest humanitarian disaster was severe flooding in Pakistan resulting from record-breaking monsoon rainfall. In the month of August, rainfall there was between five and seven times heavier than usual. Accelerated glacier melt as a result of the high temperatures significantly increased the flooding. At least 1,700 people were killed. Direct losses are estimated to be at least US$ 15bn – an enormous amount given the size of the country’s GDP. Almost nothing was insured and countless people lost all their belongings. Researchers estimate that the intensity of an event of this kind has already increased by half because of climate change, compared to a world without global warming, and that it will continue to rise in the future.

For insurers, the second-costliest single natural disaster in 2022 was flooding in the southeast of Australia in February and March. In the states of Queensland and New South Wales, extreme rainfall led to countless flash floods and severe river flooding. Numerous residents had to be rescued from their homes by boat or helicopter. The floods also affected the major population centres of Brisbane and Sydney. Of the overall losses of approximately US$ 6.6bn, just under US$ 4bn was insured. In October, torrential rainfall again resulted in disastrous flooding in the southeast of the country. However, losses were not as severe as those at the start of the year. Overall, floods in Australia caused losses of US$ 8.1bn last year, of which US$ 4.7bn was insured.

Natural cycles play an important role in Australian flood risk, as torrential rainfall is much more likely during La Niña years. However, researchers now believe that climate change is additionally influencing the intensity of the rainfall. The same is true for bushfires and heatwaves, which tend to occur in El Niño years, the opposite phase to La Niña.

For regional overviews, expert assessment video, and footnote references, please refer to Munich Re’s press release.

About Munich Re

Munich Re is one of the world’s leading providers of reinsurance, primary insurance and insurance-related risk solutions. The group consists of the reinsurance and ERGO business segments, as well as the capital investment company MEAG. Munich Re is globally active and operates in all lines of the insurance business. Since it was founded in 1880, Munich Re has been known for its unrivalled risk-related expertise and its sound financial position. It offers customers financial protection when faced with exceptional levels of damage – from the 1906 San Francisco earthquake through to Hurricane Ida in 2021.. Munich Re possesses outstanding innovative strength, which enables it to also provide coverage for extraordinary risks such as rocket launches, renewable energies, cyberattacks, or pandemics. The company is playing a key role in driving forward the digital transformation of the insurance industry, and in doing so has further expanded its ability to assess risks and the range of services that it offers. Its tailor-made solutions and close proximity to its customers make Munich Re one of the world’s most sought-after risk partners for businesses, institutions, and private individuals. For more information, please visit www.munichre.com.

Munich Re’s NatCatSERVICE collects information from governmental agencies, scientific institutes, associations, the insurance industry, the media and other publicly available sources in order to analyse nat cat losses. NatCatSERVICE applies Munich Re’s comprehensive in-house nat cat expertise and market data from the worldwide insurance markets to its analyses.

Munich Re assumes no guarantees as to the accuracy of this data, which is collected as of specific dates and can also change at any time. The information may not be used as the basis for any decision without prior professional advice and careful contextual analysis. Munich Re is not liable for damages arising from any decisions that third parties may take on the basis of this information.

This media release contains forward-looking statements that are based on current assumptions and forecasts of the management of Munich Re. Known and unknown risks, uncertainties and other factors could lead to material differences between the forward-looking statements given here and the actual development, in particular the results, financial situation and performance of our Company. The Company assumes no liability to update these forward-looking statements or to make them conform to future events or developments.

SOURCE: Münchener Rückversicherungs-Gesellschaft (Munich Re)