A new report from global advisory firm, WTW (Willis Towers Watson plc), says aging infrastructure is leading to increased insurance losses around the world.
Entitled Natural Catastrophe Review: Expert insights, lessons learned and outlook, January – June 2024, the report also looks at flooding around the world, including in Dubai, Australia, Brazil and East Africa. It looks at earthquake engineering, infrastructure vulnerabilities, drought-induced supply chain risks and the risks posed by solar storm activity.
It points out that aging and poorly managed electricity infrastructure caused wildfires in Texas – the Smokehouse Creek fire in Texas was ignited by downed power lines from a broken utility pole already flagged for replacement – flooding in Brazil was exacerbated by the inadequate maintenance of flood protection systems and the Rapidan dam failure in Minnesota is held up as another example of aging infrastructure unable to cope with present day hazards.
Secondary perils are on the rise
WTW’s researchers say climate change is increasing the frequency, severity and volatility of natural perils. “WTW Research Network is looking at whether currently-used models are fit for purpose given climate change that has already occurred,” they write in a statement about the publication’s release. They add that secondary perils are on the rise; severe convective storm (SCS) claims in 2024 so far have made the year one of the costliest insurance years on record for U.S. SCS. This, following 2023 when SCS insurance claims exceeded $50-billion for the first time. (All figures in U.S. dollars.) Looking forward, a very active Atlantic hurricane season is also being called for in the second half of 2024.
“More than ever, it’s critical to price the cost of natural catastrophe risks accurately and prepare accordingly. But all too often, the naïve use of risk models leads people to miscalculate exposure to extreme catastrophic risks,” the report warns. “The act of modelling should lead us to change the way we think about a situation.”
