Natural disasters cost insurers $163 billion in 2021, says Munich Re

2021 proved the second-most costly year on record for the world's insurers. PHOTO: REUTERS

FRANKFURT (REUTERS) - Marked by devastating hurricanes and cold snaps in the United States, 2021 proved the second-most costly year on record for the world's insurers, Munich Re said on Monday (Jan 10), warning that extreme weather was more likely with climate change.

Insured losses from natural catastrophes totalled around US$120 billion (S$163 billion) last year, second only to the US$146 billion in damages during the hurricane-ridden year of 2017.

The annual tally by Munich Re, the world's largest reinsurer, is higher than an estimate of US$105 billion that competitor Swiss Re published last month.

The US - ravaged by dozens of tornadoes in December, and by Hurricane Ida and freezes in Texas earlier in the year - accounted for an unusually large portion of the losses, Munich Re said.

"The images of natural disasters in 2021 are disturbing. Climate research increasingly confirms that extreme weather has become more likely," said Dr Torsten Jeworrek, a member of Munich Re's board.

Nearly 10,000 people died from natural catastrophes, in line with previous years. Total losses, including those not covered by insurance, were US$280 billion, the fourth-highest on record. Asia-Pacific as a region lags behind with a large insurance gap of 83 per cent against the global average of 57 per cent, Munich Re said.

"The natural disasters of 2021 have highlighted the enormity of the insurance gap in the Asia-Pacific region. For example, only about 10 per cent of the Henan flood losses in central China were insured," said Dr Achim Kassow, another member of Munich Re's board.

Hurricane Ida, damage from which stretched from New Orleans to New York, resulted in US$36 billion in insured losses. The winter storm that primarily hit Texas resulted in around US$15 billion in losses. Floods in Germany cost billions too.

"The 2021 disaster statistics are striking because some of the extreme weather events are of the kind that are likely to become more frequent or more severe as a result of climate change," said Mr Ernst Rauch, chief climate and geo scientist at Munich Re.

Many scientists agree that events in 2021 were exacerbated by climate change and that there is more - and worse - to come as the earth's atmosphere continues to warm through the next decade and beyond.

The costliest year on record was 2017, with hurricanes Harvey, Irma and Maria. Other severe years were 2011, when big earthquakes hit Japan and New Zealand, and 2005, when Hurricane Katrina ravaged New Orleans.

Insurers have in some cases been raising the rates they charge as a result of the increasing likelihood of disasters, and in some places have stopped providing coverage.

As insurers warn about climate change and the costs associated with it, they themselves are under pressure from activists to stop insuring dirty industries.

Find out more about climate change and how it could affect you on the ST microsite here.