Hazard intensification: a global threat hits close to home

From my Connecticut home, the first few miles of the drive into New York City follow the Norwalk River, a 22-mile (34 km) stream that empties into Long Island Sound. As New England's climate changes, the Norwalk River is increasingly becoming a force to be reckoned with.

The northeastern US, where Connecticut is located, gets significantly more precipitation now than it did in the late 19th century, meaning flood-prone areas are more at risk. This January, the Norwalk River again swelled over its banks, swamping the basements of historic buildings. As much as they love their river, some of my neighbours say it's also their enemy.

The Norwalk River's changing character isn't an isolated development. Rather, it's one local example of a powerful phenomenon taking shape globally: climate-related hazard intensification.

In Swiss Re Institute's (SRI) new 36-country publication, "Changing climates: the heat is (still) on," our experts document how four climate-related weather perils – floods, tropical cyclones, winter storms in Europe and severe thunderstorms – that now cause annual losses of USD 200 billion are intensifying to varying degrees. This boosts their potential to make larger contributions to future property losses.

The SRI report also highlights how a multifaceted approach combining climate mitigation, adaptation, and financial protection can help prepare society for increasing loss risks, equip public and private sector leaders with good decision-making tools, and better support recovery when disasters do strike.

For years, Swiss Re has been tracking natural catastrophe loss trends that have been driven mainly by human factors: economic growth, urbanisation, the accumulation of valuable assets in areas vulnerable to threats. Surging post-pandemic inflation has played a role, too, lifting repair costs from destructive events ranging from Hurricane Laura and Winterstorm Uri to Hurricane Ian.

In fact, the contribution of a changing climate to losses from natural catastrophes has so far been only limited. But this is likely to change. Going forward, SRI's report underscores how we increasingly must consider the rising intensity of storms themselves. With a warming planet, they'll become bigger loss drivers, packing more rain, wind, and hail while causing oceans to surge further inland.

Some regions are particularly vulnerable to hazard intensification. Asian economies like Indonesia, Thailand, China, India, and the Philippines all face elevated threats from economic losses linked to extremer weather. They have big insurance protection gaps, too, leaving them less able to recover when catastrophes do strike.

The Philippines currently suffers annual losses from weather-related perils totalling 3% of gross domestic product, a multiple of losses in the other 35 countries we analysed. Threatened by some 20 typhoons annually, the country also ranks as most exposed to intensifying hazards. 

In Europe, floods like those in Germany and elsewhere that in 2021 devastated whole towns currently account for about half of annual weather-related economic losses, but they are expected to grow more extreme and frequent as warmer temperatures fuel heavier precipitation. The United States is vulnerable, too, something I've observed at close range.

As a wind engineer who leads Swiss Re's property underwriting team, I've accompanied damage-survey teams after US hurricanes and severe convective storms. I also witnessed the storm surge when Hurricane Sandy battered my state in 2012. The US now suffers the highest absolute nat cat losses at USD 97 billion annually and ranks second in our study for exposure to hazard intensification.

While the four perils in SRI's analysis do account for a major share of natural catastrophe losses that last year totalled USD 280 billion, they are not the only hazards due to intensify. Droughts and wildfires weren't covered in this particular study, meaning our conclusions here represent just the lower bound of potential economic losses that could result from a changing climate. 

A first pillar of addressing the forces of hazard intensification remains climate mitigation, the greenhouse gas emission cuts needed to contain global temperature increases. While Swiss Re calculates that global spending on mitigation must be increased significantly to create a net-zero emissions economy by 2050, this is money well spent. Every dollar invested today means lower future GDP losses.

Accelerating climate adaptation is also essential, including utilising our industry's risk knowledge to help individuals, businesses and governments integrate more risk awareness into their growth plans. Building codes must advance, since how and where we build will matter even more in a more extreme future. Investments in climate-resilient infrastructure also yield economic benefits that far outweigh the cost of waiting for more intense hazards to materialise.

Costs associated with climate change are just starting to impact consumers. With hazard intensification due to become a driver of future economic losses, our industry must capture this in its models and underwriting, to keep pace with evolving risks.

Focused underwriting can support our clients' climate-positive transitions, while parametric insurance leverages strengths of the public and private sectors to protect more people in exposed regions. There's also a wider role for re/insurers, including by deploying our financial resources toward long-term investments in projects suited for more volatile future weather.

Intensifying weather is not some distant, impersonal threat. It's happening now, close to home -- including mine, where increased precipitation has made the Norwalk River both friend and foe.  Signals like this are an early, powerful reminder that the critical work of preparing for fiercer, costlier hazards on a global scale has only just begun.