Insurance losses soar on Los Angeles fires and US storms, says global re-insurer Munich Re
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People attempting to save a house from catching fire as a neighbouring home burns during the Eaton fire in Altadena, California, on Jan 8.
PHOTO: AFP
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SINGAPORE – The first half of 2025 is among the most costly periods for the insurance industry, with disasters in the US, including wildfires in Los Angeles in January,
The global re-insurer said the first six months’ total losses from natural disasters were about US$131 billion (S$168 billion), of which US$80 billion was insured – the second highest of any half-year period since 1980, according to the company’s records.
About half of this, or US$40 billion, was due to the record wildfires that swept across parts of Los Angeles.
“Climate change is shifting more and more the probabilities of extreme weather,” said Munich Re chief climate scientist Tobias Grimm. He said the trend of climate change-linked losses was increasing.
The good news was that much more could be done to reduce the risks and costs to insurance companies and their customers.
Weather disasters caused 88 per cent of overall losses and 98 per cent of insured losses during the first half of the year, while earthquakes accounted for 12 per cent and 2 per cent respectively, Munich Re said.
Losses from severe storms, including tornadoes, in the US totalled US$34 billion in the first six months of 2025, with about US$26 billion of this being insured.
Losses in the Asia-Pacific and Africa totalled around US$29 billion, of which about US$5 billion was insured.
The deadliest non-climate-linked disaster was the 7.7-magnitude earthquake in Myanmar on March 28 that killed 4,500 people. It caused US$12 billion in damages but only a small percentage of this was insured.
A May 2025 report by the Geneva Association, a global association of insurance companies, said annual insured losses have exceeded US$100 billion every year since 2020 and are expected to surpass US$200 billion in 2025. In 2024, they were about US$140 billion.
The risks from wildfires were growing not only in intensity and size – they are also affecting areas that were previously less vulnerable, such as the recent wildfires in South Korea, said Mr Grimm.
Thunderstorms, flash floods and tropical storms were also growing in intensity, affecting more people and places, and costing insurers more.
In the US, the National Weather Service has already issued more than 3,600 flash flood warnings across the nation in 2025, and the number could soon exceed its yearly average of around 4,000, Professor of Meteorology Jeffrey Basara at the University of Massachusetts Lowell wrote on The Conversation news site on July 24.
A July 4 flash flood in Texas Hill Country killed nearly 140 people, including more than two dozen children.
Mr Grimm told The Straits Times that another area of growing concern is the risk from rock falls and glacial lake outbursts, pointing to the glacier collapse on May 28 in the Swiss Alps that triggered a massive landslide that destroyed the village of Blatten.
He said the risk of similar events is growing as a warming planet speeds up the melting of glaciers in mountain areas, including the Himalayas. This can also cause the creation of glacial lakes that fill up quickly behind a dam caused by a rockfall. When the dam bursts, a deadly torrent of mud and rock wipes out everything in its path.
The increasing impacts of extreme weather are driving up insurance costs or leading to no coverage at all in some places, triggering falling property prices and banks to deny mortgage approvals.
“For example, in Australia, 15 per cent of properties face affordability stress, while in some parts of the US and Canada, rising risks and regulatory pressures to cap premiums have forced insurers to limit or cease coverage for some perils,” the Geneva Association said.
In large parts of Asia, the problem is lack of coverage altogether because it was not offered or was too costly, with repeat disasters entrenching poverty.
One of the key reasons insurance losses have risen over the years is because of the growing wealth and population of nations and the increasing size and density of cities.
In other words, more assets and more people placed in the way of floods, storms and wildfires. Add in the rising impacts of climate change, and this raises the chances of deadly and costly disasters.
In Los Angeles, some homes were in forested areas or canyons highly prone to wildfires. Elsewhere, cities have expanded onto flood plains or coastal areas prone to storm damage.
Plenty can be done to reduce the risks. The key is getting out of harm’s way.
“To reduce future exposure, new building development should not be allowed in high-risk areas,” said Munich Re management board member Thomas Blunck in a statement accompanying the first-half loss report.
Other steps include better building codes, early warning systems, strengthening existing infrastructure and building new infrastructure that can better withstand worsening floods, storms and fires, as well as better understanding of evolving climate risks by the public, governments and local councils.
“Embedding climate risks in all aspects of the property markets could help to make these markets more sustainable in the long run. A lot more can be done in this regard,” Mr Grimm said.
