Swiss Re says insurance losses are above $US100bn for the fifth time since 2005

Last year proved to be among the most costly ever for insurance losses, according to European reinsurance giant Swiss RE.

Hurricane Ian triggered $US50bn to $US65bn in insurance losses last year. Picture: AFP

Swiss Re says rising inflation will worsen natural disaster insurance losses, which have blown out to the fourth most expensive year on record with insured damages topping $US125bn ($185bn) last year.

This is the fifth time since 2005 insured losses have exceeded $US100bn.

The Swiss reinsurance giant said total global economic losses mounted to $US275bn last year and catastrophe costs would mount.

Hurricane Ian, which hit Florida in late 2022, proved the highest loss insurance event for the year, triggering $US50-65bn in claims.

Australia’s floods in February and March last year triggered $US4.3bn in claims the most – costly natural disaster in this country’s history.

Swiss Re Catastrophe Perils head Martin Bertogg said the magnitude of losses in 2022 was a reflection of growing property exposure, accentuated by inflation, rather than a consequence of worsening natural hazards.

“While inflation may subside, increasing value concentration in areas vulnerable to natural catastrophes remains a key driver for increasing losses,” he said.

“For our industry this is a call both to reflect the latest exposure even more carefully in risk assessments while continuing to support society in being better prepared.”

The Swiss reinsurance giant noted inflation had surged in recent years, topping 7 per cent in advanced economies and pushing up the cost of replacing damaged or destroyed property.

Swiss Re group chief economist Jerome Jean Heageli said higher interest rates would persist and might need to climb further to deal with inflation pressures.

“This means higher financing costs and, as a result, capacity providers are likely to remain more cautious in deploying capital for a number of reasons, including risk assessment and loss experience,” he said.

“In our view, as higher exposures encounter shrinking risk appetite, momentum for rising prices, higher retentions and tighter terms and conditions will likely continue.”

Swiss Re said more difficult market conditions were likely to persist in the year ahead, due to rising demand for insurance coverage and inflation driving higher values for insured assets.

This comes as at the same time capital providers have reduced their risk appetite on the back of higher interest rates and falling values of financial assets.