Catastrophe Insurance

Over the past two decades, the world has witnessed a marked increase in both the frequency and severity of these events. According to data spanning from 2000 to 2023, natural disaster losses worldwide have reached hundreds of billions of dollars annually, with 2023 alone recording some of the costliest catastrophes in recent history.

The insurance industry faces a complex challenge: while economic losses from natural disasters have surged—reaching over $300 billion globally in 2023—only a fraction of these losses are insured. This protection gap is particularly pronounced in emerging markets and less developed regions, where insurance penetration remains low. For instance, while North America and parts of Europe have relatively high insurance coverage, regions such as Latin America, Asia-Pacific, and Africa often experience severe underinsurance, amplifying the economic burden on governments and individuals.

Europe’s historical loss data reveals a steady increase in climate- and weather-related extremes, such as floods and storms, contributing to billions of dollars in economic damage annually. In the United States, the 2023 catastrophe overview highlights several major events, including hurricanes, wildfires, and severe convective storms, which cumulatively resulted in tens of billions in insured losses alone. These figures underscore the escalating exposure of insurance portfolios to increasingly volatile peril landscapes.

Factors driving these rising losses include rapid urbanization in vulnerable coastal and flood-prone areas, aging infrastructure, and the broader impacts of climate change that intensify weather patterns. The insurance sector must continuously evolve its risk modeling and underwriting practices to accommodate these changing dynamics, balancing risk transfer with affordability for policyholders.

Understanding the scale and nature of catastrophe losses, both insured and uninsured, is essential for insurers, regulators, and policymakers aiming to enhance resilience and financial preparedness. This introduction sets the stage for a detailed examination of historical trends, recent events, regional analyses, and the ongoing evolution of catastrophe insurance amid an increasingly uncertain risk environment.

Historical Loss Overview and Trends

Natural catastrophes have historically imposed enormous financial burdens on societies worldwide, with some events causing unprecedented economic and insured losses. The period from 1900 to the present has seen several landmark catastrophes that shaped the insurance industry’s approach to risk management.

Among the costliest catastrophes in recorded history, Hurricane Katrina (2005) stands out as the most expensive, causing approximately $102 billion in insured losses in the United States alone. Following Katrina, several major hurricanes and earthquakes have significantly impacted global insured losses. Notable events include Hurricane Ian (2022) with insured losses of around $56 billion, the Tohoku earthquake and tsunami in Japan (2011) at $48 billion, and Hurricane Irma (2017) causing about $42 billion in insured damages across the US and Caribbean

While individual catastrophes can cause extreme localized losses, the aggregate annual cost of natural disasters worldwide has also been on an upward trajectory over the past two decades. Analysis of economic vs. insured losses from 2000 through 2023 reveals important insights about the evolving risk landscape and insurance market coverage.

Over this period, economic losses due to natural disasters have ranged from approximately $115 billion in 2001 to a peak of $700 billion in 2011, largely driven by major events such as the Tohoku earthquake. In contrast, insured losses have consistently accounted for roughly 17% to 30% of total economic losses, highlighting a persistent protection gap worldwide.

For example, in 2005—the year of Hurricane Katrina—insured losses were about $166 billion, covering approximately 29% of the total $412 billion economic loss. Similarly, in 2022, insured losses reached $151 billion, nearly 30% of the total $355 billion economic losses reported globally.

This data underscores the ongoing challenge for the insurance industry to close the gap between economic damages and insured losses, particularly as catastrophe frequency and severity rise. The relatively stable insured loss ratio suggests improvements in insurance penetration and risk awareness but also signals the limits of current coverage against mounting climate-related risks.

The upward trend in economic and insured losses also reflects multiple factors: increased exposure due to population growth and urbanization in hazard-prone areas, greater asset values, and the intensification of natural hazards attributed to climate change. These evolving dynamics continue to drive innovation in catastrophe modeling, underwriting, and risk transfer solutions.

Catastrophe Losses in 2023: A Global Overview

Most Impactful Events

The year 2023 marked one of the costliest periods in recent history in terms of natural catastrophe-related economic losses. The ten most significant events globally resulted in more than $300 billion in total economic damage, of which only a fraction was insured—underscoring the persistent protection gap in many regions.

The most devastating event by far was the earthquake sequence in Turkey and Syria in February, which generated $92.4 billion in economic losses but just $5.7 billion in insured losses, reflecting limited insurance penetration in the region. This was followed by the summer floods in China, causing $32.2 billion in damages, and Hurricane Otis in Mexico, a rapidly intensifying storm that inflicted $15.3 billion in losses, with just $2.1 billion insured.

All other events throughout the year accounted for an additional $178 billion in economic losses and $84.8 billion in insured losses, reinforcing the widespread impact of secondary perils and chronic climate-related risks.

Global Losses by Peril Type

Analyzing total losses by peril provides insight into which types of events are becoming increasingly impactful. In 2023, earthquakes were the costliest peril, generating $99 billion in economic losses—more than double their 2000–2022 average. Severe convective storms, increasingly frequent and destructive across the U.S. and Europe, followed closely with $94 billion in losses. Flooding also saw elevated impacts, reaching $85 billion, well above historical averages.

While tropical cyclone losses were relatively subdued in 2023 compared to the historical norm, secondary perils such as convective storms and wildfires continued their upward trajectory, both in terms of frequency and severity. This trend is increasingly relevant for insurers, as these events often cause high-frequency, mid-sized losses that can challenge portfolio diversification and underwriting models.

The year’s data reaffirms the shift in global catastrophe risk patterns—driven by climate volatility, urban expansion into hazard-prone areas, and underinsurance in emerging markets—necessitating continued adaptation by the insurance and reinsurance industries.

Regional Catastrophe Losses in 2023

In 2023, the regional distribution of catastrophe-related losses revealed clear disparities in both exposure levels and insurance protection. The United States accounted for the largest portion of global insured losses, with $81.3 billion in claims stemming from 24 billion-dollar events. While this reflects a mature insurance market and broad risk coverage, total economic losses still reached $119.7 billion, underscoring the continuing impact of underinsurance in certain areas and for specific perils such as convective storms and droughts. Europe, meanwhile, registered $95.4 billion in economic losses and $23.5 billion insured, driven by severe flooding and storm activity, particularly in Italy and Central Europe. With six major events, the region showed a relatively strong insurance response, yet gaps persist in less developed markets and rural zones.

In contrast, Asia experienced $68 billion in economic damage, but only $5.4 billion was insured—highlighting a significant protection gap, especially for flood-related events such as the widespread summer inundations in China. A similar imbalance was evident in Latin America, where the La Plata Basin drought contributed to $43.8 billion in losses, of which just $4.9 billion was insured. Africa faced $16.1 billion in economic losses with merely $600 million insured, illustrating one of the lowest insurance penetration rates globally. This reflects structural challenges, including limited product access, regulatory barriers, and an underdeveloped reinsurance ecosystem. The Middle East saw minimal loss activity in 2023, but remains exposed to high-impact perils such as earthquakes and extreme heat, which could become more relevant in coming years as climate risks intensify.

Elsewhere, Oceania reported $8.9 billion in economic losses and $4.7 billion insured, supported by robust insurance systems in Australia and New Zealand. Notably, this region had one of the highest insured-to-economic loss ratios (over 50%), demonstrating effective catastrophe risk transfer mechanisms. The rest of North America (excluding the U.S.) saw relatively minor losses, with no billion-dollar events and $5 billion in economic damage, $2.7 billion insured. Overall, the 2023 data reinforces the global pattern of high exposure in emerging markets with low insurance protection, and conversely, higher insurance penetration in developed economies with more frequent events. This imbalance underscores the growing urgency for innovative risk financing solutions and expanded insurance access in climate-vulnerable regions.

United States Catastrophe Losses in 2023: A Deeper Look

The U.S. in Global Context: A Disproportionate Share of Insured Losses

In 2023, global catastrophe-related economic losses totaled over $300 billion, with the United States accounting for 30% of that total. However, when viewed through the lens of insured losses, the U.S. carried even greater weight: 67% of all insured global catastrophe losses originated from the U.S., while the rest of the world made up only 33%.

This imbalance illustrates a fundamental truth in the global insurance landscape: while catastrophic events are global, insurance protection is not. The U.S.’s mature insurance infrastructure, higher coverage penetration, and well-established risk transfer mechanisms place it far ahead of most other regions in terms of financial resilience. Meanwhile, underinsurance in many parts of Latin America, Asia, and Africa means that economic shocks often go unbuffered by formal insurance systems.

These figures underline the global protection gap, particularly in emerging markets, and emphasize the importance of expanding insurance access, reinsurance capacity, and public-private initiatives in climate-vulnerable geographies.

U.S. Economic Losses by Peril in 2023: Secondary Events Take the Spotlight

A breakdown of 2023 U.S. economic losses by peril type reveals a shifting landscape of risk, driven increasingly by high-frequency, mid-sized events rather than singular mega-catastrophes.

• Severe convective storms dominated the year, generating $73 billion in economic losses. This represents nearly two-thirds of the country's total catastrophe losses and reflects both the intensity and concentration of storm outbreaks across the South and Midwest.

• Droughts followed with $14 billion, exacerbated by prolonged dry conditions in key agricultural and water-stressed regions.

• Flooding was responsible for $12 billion, highlighting the country’s ongoing exposure to inland flood events—many of which occur outside FEMA-mapped flood zones and thus remain underinsured.

• Wildfires contributed $6 billion, a lower-than-average figure compared to prior years but still a persistent threat, especially in western states.

• Other events, including winter storms and minor hurricanes, added another $10 billion in damages.

This peril-specific data reaffirms that secondary perils (like SCS, drought, and flood) are now driving a substantial portion of total losses, compelling insurers to refine their pricing, modeling, and capital management strategies to keep pace with evolving climate risk patterns.

U.S. Annual Losses Snapshot: 2023 vs. Historical Benchmarks

The 2023 catastrophe year for the United States closed with $114 billion in economic losses and $80 billion in insured losses, resulting in a 30% protection gap—the share of losses that remained uninsured.

The U.S. performed better than historical norms in terms of coverage levels, with the protection gap narrowing considerably compared to the 47% long-term average. This can be partially attributed to high SCS insurance uptake and a growing awareness of catastrophe risk.

Nevertheless, these figures illustrate that even in advanced markets, insurance does not cover everything. As climate volatility increases and exposure accumulates, further action is needed—both in public policy and product innovation—to ensure more comprehensive risk protection across all communities.

Conclusion

The events of 2023 highlight the growing importance—and limitations—of catastrophe insurance in a world facing more frequent and severe natural disasters. While countries like the United States demonstrate the value of a mature insurance market, a significant protection gap remains globally, especially in emerging regions with limited coverage.

A key takeaway from the year is the rise of secondary perils—such as convective storms, wildfires, and floods—as major drivers of economic and insured losses. These events, though often smaller in scale, are increasingly costly and disruptive.

To close the protection gap and strengthen resilience, the insurance industry must invest in risk modeling, expand coverage access, and support climate adaptation strategies. Addressing these challenges will be essential to ensuring that insurance systems can evolve alongside the risks they are meant to manage.

Sources & References

Aon Climate and Catastrophe Insight 

https://assets.aon.com/-/media/files/aon/reports/2024/climate-and-catastrophe-insights-report.pdf

Global Catastrophes Statistics

https://www.iii.org/fact-statistic/facts-statistics-global-catastrophes