Climate Change: Natural Disasters Become Insurance Industry’s Challenge, may reach $14500 Cr in 2025
New Delhi| The increase in the intensity and frequency of natural disasters is becoming a serious headache for the insurance industry. According to the latest report by Swiss Re, a leading global reinsurance company, the amount of insured losses due to climate-related disasters could reach $14,500 crore in the year 2025. This potential damage is about 6 percent greater than the 2024 insured loss ($13,700 crore).
According to the report, if one look at the figures of the last few years, the insured losses due to disasters are increasing at the rate of 5 to 7 percent annually, which is an alarm bell not only for insurance companies but also for global financial stability. If this were the case, the second largest annual insurance loss would occur after 1990. However, storms Harvey, Irma and Maria in 2017 caused the biggest shock ever. According to Swiss Re’s disaster risk model, the insurance claims figure could even reach $30,000 crore in 2025, although the probability is believed to be around 10 per cent.
2024 Year of the largest insurance claims
Natural disasters caused a total economic loss of $31,800 million globally in 2024, but only 57 percent of that, or $18,100 million, could be offset by insurance. The remaining losses remained unprotected, which clearly shows that a large number of individuals and businesses are still deprived of insurance protection. Hurricanes Helen and Milton caused massive devastation in 2024. Severe tornadoes in the U.S., global urban flooding and the largest-ever insurance claims in Canada made this year special in insurance history.
Insurance companies started shying away from issuing policies in high-risk areas
According to the report, due to extreme weather events, there is also a change in the strategy of the insurance industry. Now companies have started shying away from issuing policies in high risk areas. For example in Los Angeles, the 2024 wildfires destroyed 23,000 hectares. It lost 29 lives and devastated over 16,000 structures. Due to this, about a dozen major insurance companies of California either stopped giving new policies or imposed strict conditions on them.
