Following the long-term annual growth trend of 5-7%, global insured natural catastrophe losses may reach $145bn in 2025, mainly driven by secondary perils like severe thunderstorms, floods and wildfires, says Swiss Re Institute in its latest sigma report. Primary perils like hurricanes and earthquakes pose biggest risks, potentially driving insured losses to $300bn or more in a peak year.
2025 started with wildfires in Los Angeles, causing an estimated $40bn in insured losses. While these losses from a secondary peril are substantial, primary perils remain the biggest threat: when a severe hurricane or strong earthquake hits a densely populated urban area, insured losses in that year could be more than double the long-term loss trend.
Swiss Re CEO P&C Reinsurance Urs Baertschi said: "In addition to helping clients with traditional risk transfer, reinsurers also provide data, risk insights and knowledge about where dangers lie. The reinsurance industry is a shock absorber when danger materialises into disaster and an essential discussion partner around risk awareness and risk prevention."
Peak years, due to a few primary-peril events or the accumulation of both secondary-peril and primary-peril events, should not be considered an anomaly. The most recent peak year was 2017, driven by Hurricanes Harvey, Irma, and Maria. Since then, underlying risk has increased continuously with economic and population growth as well as urban sprawl, including in areas vulnerable to natural catastrophes. In addition, climate change effects are playing a role in compounding losses for some weather perils and regions.
According to Swiss Re Institute estimates, some of the hurricanes from the early 20th century would cause losses well over $100bn if they were to strike today. For example, Hurricane Andrew in today's prices caused $35bn in insured losses in 1992. If a hurricane were to strike the same path today, it would cause losses nearly three times higher, due to economic growth, population increase and urban sprawl.
Meanwhile, Hurricane Katrina, the costliest single insured loss event for the (re)insurance industry ever, would not cause the same destruction as 20 years ago. Insured losses would still reach around USD 100 billion due to rising housing and construction costs, but improved flood defences and a 20% decrease in local population along Katrina's path have significantly reduced exposure.