Hurricanes and earthquakes could lead to global insured losses of USD 300 billion in a peak year, finds Swiss Re Institute

• Following the long-term annual growth trend of 5-7%, global insured natural catastrophe losses may reach USD 145 billion in 2025, mainly driven by secondary perils like severe thunderstorms, floods and wildfires
• Primary perils like earthquakes and hurricanes pose biggest risks, potentially driving insured losses to USD 300 billion or more in a peak year, according to Swiss Re Institute analysis
• A reoccurrence of the 1995 Kobe earthquake and 2011 Great East Japan earthquake today could see insured losses between USD 35 billion and USD 80 billion for the two events, respectively

Singapore, 29 April, 2025 – 2025 started with wildfires in Los Angeles, causing an estimated USD 40 billion in insured losses. While these losses from a secondary peril are substantial, primary perils remain the biggest threat: when a severe hurricane or strong earthquake hits a densely populated urban area, insured losses in that year could be more than double the long-term loss trend. Based on model analysis and considering industry-exposure database, Swiss Re Institute estimates that hurricanes and earthquakes could drive global insured losses to USD 300 billion or more in a peak year.

Urs Baertschi, CEO Property & Casualty Reinsurance at Swiss Re, said: "In addition to helping clients with traditional risk transfer, reinsurers also provide data, risk insights and knowledge about where dangers lie. The reinsurance industry is a shock absorber when danger materialises into disaster and an essential discussion partner around risk awareness and risk prevention."

Peak years, due to a few primary-peril events or the accumulation of both secondary-peril and primary-peril events, should not be considered an anomaly.

In Asia Pacific, two of the largest earthquake events in terms of economic losses in recent decades were the 1995 Kobe earthquake and the 2011 Great East Japan earthquake. Due to exposure growth and urban sprawl, as well as increased insurance penetration, a repeat of these earthquakes today could result in economic losses of USD 200 billion and USD 300 billion respectively, while insured losses could amount to USD 35 billion and USD 80 billion respectively.

Recent seismic studies put the probability of a large magnitude earthquake on the Nankai Trough in the next three decades at 80%. While Japan instituted an earthquake insurance programme to ensure sufficient capacity in the event of a megaquake, such as the 1923 Great Kanto Earthquake, the programme would only just cover most residential insurance losses. Swiss Re Institute estimates insured losses could amount to USD 150 billion.

Balz Grollimund, Swiss Re's Head of Catastrophe Perils, said: "Learning from past events is crucial to build resilience. Scenario modelling is a powerful tool to anticipate the impact of past earthquakes if they happened today and sets the basis for understanding the economic impact of potential future earthquakes."

Insurance coverage for earthquake losses varies strongly by country and in the case of the 2010-11 Christchurch earthquake sequence, a combination of high insurance penetration (70% in New Zealand, in part driven by the then-Earthquake Commission) and high geotechnical vulnerability yielded some of the largest seismic-induced insured losses in history. Post event, the high insured claims paid by the re/insurance industry provided the funds needed for reconstruction, which has helped make the city more resilient than before the quakes.

Loss severity is rising globally with the US accounting for almost 80% of global insured losses in 2024, due to its vulnerability to severe thunderstorms, hurricanes, floods, wildfires, and earthquakes. Insurance premium rates are informed by many factors including local regulations and inflation. Yet in the long-run and across geographies, the main factor determining premium rates is exposure to natural perils. This is evident in states like Florida, Texas, California, Louisiana, and Colorado, which account for about 50% of all natural catastrophe losses in the US. Florida faces high hurricane-related losses, with premiums per household twice the national average. Similarly, in California, the highest premiums are localised in areas with greatest exposures to wildfire risk.

As natural catastrophe losses continue to rise, it is crucial to reduce loss potential from the outset, both to reduce the cost of insurance and to maintain the viability of risk transfer business. For example, severe storms can overwhelm local protection systems and cause  flooding, and while mitigation measures come at a price, a recent Swiss Re Institute study shows that flood protection through dykes, dams and flood gates is up to ten times more cost-effective than rebuilding after a disaster.

Jérôme Haegeli, Swiss Re's Group Chief Economist, said, "Close collaboration between the public and private sectors is vital for effective protective measures to reduce losses. In addition, a well-capitalised reinsurance sector, backed by USD 500 billion in capital, acts as a vital shock absorber, helping communities and economies recover more quickly. That is why it is important that capital grows in line with rising risk, for the industry to fulfil their role for future peak years. "

Total economic and insured losses in 2024 and 2023

In 2024, global insured losses from natural catastrophes reached USD 137 billion, driven by Hurricanes Helene and Milton, severe convective storms in the US, wildfires and major floods worldwide.

Note: Due to rounding, some totals may not correspond with the sum of the separate figures.
Source: Swiss Re Institute

How to order this sigma study:

The English version of the sigma 1/2025, "Natural catastrophes: insured losses on trend to USD 145 billion in 2025»", is available in electronic format. You can download it here.