$268 Billion = Total economic and insured loss estimate for 2022’s natural disasters.
Approaching $115 Billion = Recent estimate for insured losses from 2022 natural disasters 
Environmental changes are reshaping the world as we know it, and insurance carriers are struggling to keep up. Additionally, rapid urbanization and wealth accumulation in disaster prone areas only makes losses after severe natural disasters worse with every passing year. Property insurance carriers are met with the challenge of being required to adapt to these unpredictable loss patterns.
In the Crosshairs of Disaster
Unfortunately, the United States dominates global catastrophe loss patterns, accounting for over half of global economic losses in both 2021 and 2022. Why is this? In 2022 alone, the U.S. has experienced 15 separate billion-dollar weather and climate disaster events and, over the last decade, extreme weather events have continued to pummel the United States.2
- Hurricane Ida in 2021 – costliest natural disaster event globally at the time with total losses of $65 billion3
- Hurricane Ian in 2022 – early estimates project losses as high as $74 billion
- 8 of the 10 costliest wildfires in recorded history took place in the U.S. over last decade – with insured losses of $92.7 billion4
- Severe windstorms wreaked $259.9 billion in total losses from 2010 to 20225
- Costliest U.S. winter storm event on record in late 2021 through early 2022 accounted for $25.2 billion in total losses6
- Annual U.S. flood losses are predicted to jump 26% over the next three decades, from $32.1 billion to $40.6 billion by 20507
Beyond the economic fallout that comes after natural disasters, the insurance industry is also coming to a head with multiple other challenges: high inflation, an unprecedented supply chain crisis, labor issues, and the threat of recession, which amount to elevated loss severity because repair and replacement work becomes more expensive.
Insurers – Economic First Responders Following Catastrophic Events
Insurers help speed up recovery efforts by providing post-disaster funding for rebuilding efforts and financial protection to insureds. However, carriers can only deliver on this promise if they’re able to remain solvent.
Primary insurers are struggling with underwriting losses — $24.3 billion net losses in the first nine months of 2022.8 Carriers are trying to adapt their underwriting strategies and develop climate modeling that reflects the nature of the interconnected weather events that are negatively impacting their bottom line.
How are commercial property insurance carriers potentially reacting? They are:
- Retreating from risky markets
- Requiring more accurate asset valuation
- Increasing underwriting scrutiny
- Shifting more risk to insureds
Combine claims from multiple recent global catastrophic events with sustained high inflation, the effects of climate change, and oscillating repair and construction costs, and we see why the reinsurance market has also been impacted. Compounding the capital challenges for reinsurers, additional capital is unlikely to enter reinsurance market.
How Can You Go from Powerless to Powerful?
That’s right – not all hope is lost. Finding property coverage that financially protects your business, and at the right price, from natural disasters is going to be challenging in 2023, but securing the best relationships with carriers, underwriters, and an experienced broker can help you make a soft landing in this hard market.