New report warns of climate costs for insurers

In 2023, the West pacific experienced the second fewest typhoons since 1951. Despite this, Bloomberg Intelligence (BI) has warned insurers not to mistake the dip as a sign of future security.

Charles Graham, BI Senior Industry Analyst, said: "El Niño didn’t drive above-average cyclone activity in the West Pacific in 2023, contrary to expectations. The region endured 17 named storms (including Dora, which crossed the East Pacific dateline). The only year to have had fewer named storms in the region since 1951 was 2010, with 15."

BI’s report warns that record sea-surface temperatures and changes to the El Niño phenomenon could mean insurers and reinsurers face the threat of higher catastrophe claims, resulting in recent reinsurance price hikes becoming insufficient.

Record high sea-surface temperatures

According to BI, in 2023, the North Atlantic Sea surface reached new temperatures, subjected to a strong to severe marine heatwave in June, which swept through the Mediterranean basin in July.

The report highlighted that global sea-surface temperatures between April and December were the highest since records began in 1850.

In the North Tropical Atlantic, the heatwave continued to increase in intensity through the summer, with the western part of the region moving from moderate to strong warming conditions. The tropical Pacific was also affected by an intensifying heatwave in the eastern part of the basin.

Above-average number of storms in the Atlantic

Record sea surface temperatures contributed to above-average levels of storm formation in the Atlantic, Eastern North Pacific and Indian Ocean, alongside convective storms, which brought hail and flooding to many regions.

With 20 named Atlantic storms in 2023, the year ranks fourth highest since 1950. Of these, seven developed into hurricanes and three into major hurricanes (category 3 or above).

An average Atlantic season will see 14 named storms, including seven hurricanes and three major hurricanes.

Despite fluctuations, extreme weather continues to be a growing concern for insurers around the world with floods and storms the driving force behind global insured catastrophe losses.