Reinsurers are warning of increasing climate-related natural catastrophes

Droughts and forest fires caused billions in damage in Europe this summer. The reinsurers warn at their industry meeting: Climate-related disasters are increasing.

Zurich. The three major reinsurers Munich Re, Swiss Re and Hannover Re are preparing for increasing weather-related natural disasters.

Floods, droughts, hail, forest fires and severe thunderstorms are becoming increasingly important as causes of damage, Hannover Re announced on Monday at the traditional industry meeting “Rendez-Vous de Septembre” in Monte Carlo. The industry traditionally meets in Monaco in September to prepare for contract negotiations at the turn of the year.

In the long term, they led to higher potential claims burdens and a growing demand for reinsurance protection. “The effects of climate change are becoming increasingly noticeable,” explained Munich Re.

The level of damage is increasing

For a long time, so-called non-peak perils - events below the largest natural disasters, such as hailstorms - were considered events with comparatively low damage overall.

But they have now added up to levels of damage that were previously primarily associated with major events such as earthquakes or hurricanes. Heat, a more gradual risk, is also increasingly becoming a driver of damage. Several thousand people died in summer heat waves in Europe.

In addition, the exceptionally high temperatures as well as floods significantly affected the infrastructure and thus also supply chains. They also caused significant damage to agriculture, healthcare, buildings and technical systems.

Swiss Re boss Berger calls for better protection against forest fires

According to Swiss Re, wildfires are the world's fastest growing weather risk. In Europe, insured losses from forest fires have increased by an estimated eight to eleven percent annually over the past few decades. The risk continues to grow because more and more people and assets are located in areas at risk of forest fires.

Overall, the risk of natural disasters is an important driver of demand for reinsurance. Insured losses from natural disasters continue to increase by five to seven percent annually. The key reasons for this are increasing risk exposures, rising assets and changing risk patterns.

Swiss Re's models suggested that insured natural catastrophe losses could amount to around $320 billion in an extreme loss scenario in 2026.