Major peril could double NatCat losses in 2025: Swiss Re

Global insured natural catastrophe (NatCat) losses in 2024 reached US$137 billion in 2024, the fifth consecutive year they’ve been higher than US$100 billion, Swiss Re says in its recent sigma report.

Canada’s worst-ever catastrophe year accounted for almost $9 billion of those losses. Swiss Re’s total includes an estimated $40 billion of insured losses from California’s wildfires in 2025 Q1.

Swiss Re notes losses from secondary peril events such as floods and wildfires — which do less damage but happen more frequently — are on the rise. But the big years, the “peak loss” years, happen when damage from primary perils such as hurricanes and earthquakes are added into the mix.

The global reinsurer is on the watch for a primary peril this year, such as a strong hurricane hitting Miami or a major earthquake in Los Angeles, for example. If that were to happen, Swiss Re estimates a 10% chance of insured losses exceeding US$300 billion in 2025, making for a “peak loss” year.

“This is what a peak-loss year like 1999, 2004, 2005, 2011 or 2017 could look like today, with major primary peril losses coming in addition to the 2025 trend insured loss of US$145 billion,” says Swiss Re’s sigma report. “Reinsurance plays a critical role as a shock absorber of peak loss year volatility and is expected to cover more than half of all above-trend global losses.

“With global reinsurance capital currently estimated to be around US$500 billion, and leading reinsurers having an average solvency ratio of around 250%, the reinsurance market would remain well capitalized, even after covering its share of a US$300 billion loss.”

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A “peak year” is a measure of the insured NatCat losses for the year compared to the rising historical average of claims costs. When NatCat losses hit a certain point beyond the anticipated historical average (“one deviation,” as Swiss Re calls it), they are defined as peak years. 

In 2025, a peak year, or one standard deviation from the average, would be US$258 billion.

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Swiss Re notes NatCat losses are climbing by 5% to 7% each year. That would mean 2025 losses would be expected to reach US$145 billion, if the historical average holds true.

Swiss Re’s report talks about the importance of building resilient homes and buildings to minimize damage arising from the effects of a changing climate. But enforced building codes can only go so far, the reinsurer adds, because concentrations of exposure due to population growth and rapid development are important factors as well.

“Adaptation measures like strengthening building codes or flood protection infrastructure help reduce exposures, but often such actions are insufficient to compensate for rising losses from value accumulation,” Swiss Re’s sigma report states. “A case in point is that even with major advancements in building codes, in 2022 Hurricane Ian still inflicted insured losses of US$64 billion (in 2024 prices).

“The main driver of these losses was the 620% growth in population in the landfall area since 1975.”

David Gambrill

David has twice served as Canadian Underwriter’s senior editor, both from 2005 to 2012, and again from 2017 to the present.