Global property insurance premiums are forecast to rise by 22% by 2040 as weather-related catastrophes become both more intense and frequent.
In a recent report, Swiss Re estimates that the increase in new premiums could be worth up to $183bn (£132bn) over the next two decades.
The reinsurance giant said that climate change poses “the biggest long-term threat to the global economy”, and that up to 18% of GDP could be lost by 2050 if no mitigating actions are taken.
It warned that risks from secondary perils, such as floods and wildfires, are growing and exposing ever larger communities and assets to extreme climate events amid growing urbanisation.
“Promoting the conditions for long-term sustainable growth is particularly important in the face of climate change, which poses the biggest long-term threat to the global economy,” said Jerome Haegeli, Swiss Re’s group chief economist.
“If we are to build a sustainable insurance system that allows society to manage and absorb future risks, we need to make risks and opportunities quantifiable.”
Swiss Re revealed earlier this year that natural catastrophes caused global economic losses of $190bn in 2020, with the insurance industry covering $81bn.
This was up from $54bn of insured losses in 2019, while manmade disasters cost insurers an additional $8bn, bringing total global insured losses to $89bn in 2020 – the fifth-costliest year since 1970.
The company's forecasts suggest future peak losses as high as $300bn, mainly due to population growth, value accumulation in highly-exposed areas, and climate change.
”There is a clear recognition that claims’ frequency and severity is rising as demonstrated by recent natural catastrophes,” said Swiss Re’s CEO for reinsurance, Moses Ojeisekhoba.
“This means the need for protection is growing, and the industry has important work to do in offering insurance and closing the protection gap.”
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Author: Chris Seekings