According to the broker’s latest Natural Catastrophe and Climate Report, global natural perils caused an estimated $417 billion in direct economic losses in 2024. While the insurance industry covered $154 billion of these losses, a significant protection gap of $263 billion remained.
The report highlights a concerning trend, with 2024’s economic losses exceeding the decadal average by 15% and the 20-year average by 16%. Furthermore, 60 individual billion-dollar events were recorded globally, with the United States experiencing at least 33 of these events.
These findings underscore the growing impact of climate change and the increasing financial burden on the insurance industry.
Insured natural catastrophe losses in 2024 reached a significant level, exceeding both the decadal and 20-year averages. The insurance industry, both private and public, covered $154 billion in losses, a 27% increase over the decadal average and a 44% jump compared to the previous 20-year average.
Gallagher Re’s report highlighted Severe Convective Storms (SCS) as a major contributor to these losses, accounting for 41% of all insured losses globally.
Gallagher Re’s report highlights a significant increase in insured natural catastrophe losses in 2024. The insurance industry, encompassing both private and public entities, covered a total of $154 billion, surpassing the decadal average by 27% and the 20-year average by a substantial 44%.
Severe Convective Storms (SCS) emerged as a dominant factor, contributing to 41% of all insured losses globally.
The report also emphasises the growing importance of public-private partnerships and increased insurance penetration in regions with historically low coverage. However, despite these efforts, a significant protection gap persists, leaving many vulnerable populations without adequate insurance coverage.
“The overall economic toll in 2024 was not record-setting, but it further reinforced the vulnerabilities the world continues to face from costlier ‘non-peak’ peril occurrences affecting large population centres. This again illustrates the importance of this peril to the global re/insurance industry.”
Gallagher Re also suggested that the annual rate of insured losses is growing faster than the overall economic total.
“The need for more guaranteed climate or natural catastrophe financing to mitigate, adapt, or transition economies to more green-based energy production is critical, especially as the complexity of compound risk becomes that much more challenging.”
The broker’s report continued, “While 2024 was not a record year for total loss costs, we are continuing to witness the ongoing influence of climate change on the behaviour of individual events and broader weather patterns.
“2024 officially became the warmest year on record dating to 1850, and scientists believe it was the warmest year in the last 125,000 years. Scientific research is concluding that there are differences in what a climate change influence looks like on an individual peril basis and how certain parts of the world will be affected.
“The fingerprints of climate risk do undeniably exist on many individual events. One must understand that climate risk is not solely an issue for physical damage potential, however, and the non-physical implications are substantial. This may affect sectors such as real estate, agriculture, industry and manufacturing; as well as impacting health and retirement, and the long-term strategies of investors.
“The reduction of greenhouse gas emissions is essential to this process, and this will be vital in stabilising or reducing the impact of future extreme weather events. The insurance industry maintains a critical role in addressing and working to mitigate climate risk, but it must be done collectively with other private and public market stakeholders.”