Natural disaster risks

Rising trend in losses

Each year, natural disasters around the world destroy assets worth hundreds of billions of dollars. In many cases, only a small portion of the loss is insured. While the insurance gap in industrialised countries has narrowed in recent years, it remains unchanged in developing and emerging countries that are particularly susceptible to disasters: following many loss events from storms, floods, landslides and other disasters, people and businesses affected are left to bear virtually the full brunt of the losses themselves. They frequently rely on subsidies and donations from their own country or from abroad.

US$ 270bn

Losses from natural disasters in 2022
Roughly 55% was not insured

For insurers, it is essential to have in-depth knowledge of risks and how they are developing in order to be able to assess extreme risks and develop new insurance solutions. The majority of research findings indicate that weather-related natural disasters are already being influenced by climate change, and that this influence is likely to become even stronger in the future. Short- and medium-term natural climate oscillations also significantly influence the risk situation.

In order to be able to assess the trends and risks emanating from natural hazards, it is therefore essential to investigate the scientific background, analyse large quantities of data (data analytics) and develop high-resolution risk models.

Five decades of research into natural disasters

When the rising trend in both overall and insured natural disaster losses first emerged in the 1970s, Munich Re was quick to identify the greater need for expertise in this field. Since then, its experienced scientists and insurance experts have been analysing and assessing the full spectrum of natural hazards, ranging from cyclones, severe thunderstorms and floods to earthquakes and volcanic eruptions.

Risk analyses reflecting the current state of scientific knowledge form the basis for risk models, the range of natural hazard covers for our clients and the development of innovative insurance solutions.

Climate change is taking an increasing toll. The natural disaster figures for 2022 are dominated by events that, according to the latest research findings, are more intense or are occurring more frequently. Prevention and financial protection, for example in the form of insurance, must therefore be given higher priority.

Thomas Blunck

Munich Re

Chair of the Reinsurance Committee

Bulk of natural disaster losses remains uninsured

Earthquakes, storms, floods and droughts: only roughly a quarter of natural disaster losses were insured at the start of the 1980s – even in highly developed industrialised countries. Today the average figure is still no more than half. In emerging and developing countries on the other hand, the situation has remained unchanged for decades: the insured portion is still well under 10%, and in many cases it is virtually zero. And yet the broader use of insurance, especially in developing countries, could help people cope better with financial losses following natural disasters and help them resume their daily lives as quickly as possible. Munich Re is making important contributions in this area and developing innovative insurance solutions – some of them in collaboration with NGOs, partners in the public sector, and supranational organisations. Insurers help to avoid losses by accurately assessing the risks.

Risks

Wildfires: As the climate changes, so do the risks

Hail, tornadoes and flash floods: Thunderstorm losses are on the rise

Risks

Thunderstorms, hail and tornadoes: Localised but highly destructive

Risks

Floods and flash floods: Underestimated natural hazards

Risks

Winter storms - A risk to entire continents

Hurricanes, typhoons, cyclones – the natural hazards with the highest losses

Risks

Tropical cyclones — The natural hazard with the highest insured losses

Risks

Droughts and heatwaves: Gradual but catastrophic

Risks

Earthquakes - A deadly threat

Risks

Volcanic eruptions – The Earth’s ring of fire

The challenge: from the science to insurance

Munich Re identifies and analyses changing or emerging risks from natural hazards, including changes resulting from climate change and natural climate variability. The aim is to thoroughly assess the loss potential from natural hazards and to promptly harness findings on changes for the purposes of our own risk management and for the benefit of our clients.

Find out more about natural disaster risks

Risk assessment and risk management solutions

Why not benefit from our decades of experience in assessing natural disaster risks. Munich Re can offer solutions that will meet your specific requirements.