Insurers exiting high-risk areas as climate losses surge

Insurers are exiting high-risk areas due to a rise in climate-related losses, Bloomberg Intelligence (BI) has revealed.

New research by the firm showed losses surged by 360% in the past 30 years from the increased frequency and intensity of natural disasters.

It also revealed that global insured losses from natural disasters in 2023 were estimated at $118bn (£92bn), above the 2017-21 average of $97bn (£76bn).

In turn, more than half of the top 20 global reinsurers held or cut their natural-catastrophe exposure in the January 2023 renewals.

As a result, insurers are raising premiums and exiting areas they feel are “uninsurable”, BI claim.

“Increased frequency of climatic events has exposed insurers to more risk as reinsurers are reducing their exposure to secondary peril events by raising the loss threshold for reinsurance to kick-in,” Grace Osborne, BI ESG analyst, said.

Prices

Among natural-catastrophe events that would have caused losses is Hurricane Ian.

This struck in September 2022 and resulted in billions of pounds in claims costs.

While firms are considering cutting their exposures to reduce cost, however, BI warned that this may cost them in the short-term.

For example, it stated that Axa XL Reinsurance raised prices 10% in 2023, but took in 5% less as a result of cutting exposure.

Osborne also added that consumer appetite to shift climate risk to insurers could decline if prices remained high.