Munich Re: Record thunderstorm losses in 2023 – “The warming of the earth that has been accelerating for some years is intensifying the extreme weather in many regions, leading to increasing loss potentials”

9 January 2024 (Munich Re) – Worldwide, natural disasters in 2023 resulted in losses of around US$ 250bn (previous year US$ 250bn), with insured losses of US$ 95bn (previous year US$ 125bn). Overall losses tally with the five-year average, while insured losses were slightly below the average figure of US$ 105bn. Unlike in previous years, there were no mega-disasters in industrialised countries that drove losses up (such as Hurricane Ian in 2022, which caused overall losses of US$ 100bn and insured losses of US$ 60bn).

Instead, the loss statistics were characterised by the large number of severe regional storms. Such high thunderstorm losses have never been recorded before in the USA or in Europe: assets worth around US$ 66bn were destroyed in North America, of which US$ 50bn was insured, while in Europe the figure was US$ 10bn (€9.1bn), of which US$ 8bn (€7.3bn) was insured. A large body of scientific research indicates that climate change favours severe weather with heavy hailstorms. Similarly, loss statistics from thunderstorms in North America and other regions are trending upward.

The number of deaths caused by natural disasters rose to 74,000 in 2023, well above the annual average of the last five years (10,000). After years of relative calm, a series of devastating earthquakes led to humanitarian disasters. Around 63,000 people (85% of the year’s total fatalities) lost their lives as a result of such geophysical hazards in 2023 – more than at any time since 2010. In contrast, economic losses from natural disasters were dominated by severe storms: 76% of overall losses were weather-related, while 24% had geophysical causes.

Global temperature set to break record

Weather disasters were exacerbated by extremely high temperatures. Worldwide, average temperatures to November were roughly 1.3°C above those in pre-industrial times (1850–1900). It soon became clear that 2023 would become the hottest year since temperature measurements began, which means that the last ten years are the hottest on record.

The El Niño phenomenon, a natural climate oscillation in the North Pacific with effects on extreme weather in many regions of the world, played a role in the temperatures. However, researchers attribute the trend towards warmer global temperatures mainly to climate change, with natural fluctuations playing a subordinate role.

Seasonal temperature records tumbled one after another in 2023. Spring temperatures of over 40°C were recorded in southwest Europe (April) and in Argentina (September), temperatures of more than 50°C in northwest China, and night-time temperatures in excess of 32°C in the US state of Arizona in July: according to studies, there are clear connections to climate change.

In many regions, major wildfires resulted from heatwaves and drought. In Canada, fires raged for several weeks, destroying 18.5 million hectares of forest, more than ever before. However, the fires did not reach any major cities or industrial facilities, meaning that Canada avoided another wildfire disaster like the one in Fort McMurray in 2016 (damage at the time: US$ 4.1bn, of which US$ 2.9bn was insured).

“The warming of the earth that has been accelerating for some years is intensifying the extreme weather in many regions, leading to increasing loss potentials. More water evaporates at higher temperatures, and additional moisture in the atmosphere provides further energy for severe storms. Society and industry need to adapt to the changing risks – otherwise loss burdens will inevitably increase. Analysing risks and the changes to them is hardwired into Munich Re’s DNA. That is what enables us to consistently offer insurance covers against natural disasters – and even to expand them. This allows us to cushion a portion of the losses and alleviate some of the hardship caused”, explains Ernst Rauch, Chief Climate Scientist.

The year’s costliest events

The series of earthquakes in southeast Turkey and Syria in February was the year’s most destructive natural disaster. The most severe, a 7.8-magnitude tremor, was the strongest quake in Turkey for decades. Some 58,000 people were killed, countless buildings collapsed, and there was significant damage to infrastructure. With overall losses of around US$ 50bn, it was also the year’s costliest natural disaster. Despite the fact that earthquake insurance is mandatory for residential buildings in Turkey (Turkish Catastrophe Insurance Pool, TCIP), insured losses came to just US$ 5.5bn.

In terms of overall losses, the second-costliest natural disaster was Typhoon Doksuri. In July, the storm brushed the coastline of the Philippines before making landfall at Jinjiang in Fujian province on the Chinese mainland with wind speeds of around 180 km/h. Doksuri was accompanied by extremely heavy rainfall that triggered destructive flooding. In parts of China, 600 mm of rain fell in one day, the heaviest daily rainfall amount ever recorded in the country. Overall losses came to around US$ 25bn, of which only roughly US$ 2bn was insured – an example of the large insurance gap for natural disasters that persists in China.

The year 2023 was once again characterised by extremely high insured losses from natural disasters, despite the fact that there were no extreme individual losses. This underlines the important role that insurance plays in cushioning the consequences of natural disasters.

Thomas Blunck, member of the Munich Re Board of Management

The rapid intensification of Hurricane Otis on the west coast of Mexico in October was another exceptional event: within twenty-four hours, it developed from a weak tropical storm to a highest-category hurricane. It made landfall directly in the holiday resort of Acapulco and devastated the city. With wind speeds of up to 265 km/h, it was the most severe storm ever to hit Mexico’s Pacific coast. Overall losses are estimated at US$ 12bn, and insured losses at around US$ 4bn due to the high concentration of hotels in the city. It was the year’s third-costliest loss in terms of overall losses.

Doksuri and Otis fall into the pattern that scientists expect as a result of climate change, namely a shift towards an increased number of intense storms and storms with extreme rainfall. Experts also attribute the more frequently observed rapid intensification of tropical storms to climate change. [more]

Record thunderstorm losses and deadly earthquakes: the natural disasters of 2023