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<\/a><\/figure><\/div>\n\n\nThe phenomenon is not unique to South Africa, with Richman stating severe convective storms were primarily responsible for CAT losses, accounting for 68% of global insured natural catastrophe losses in the first half of last year. <\/p>\n\n\n\n
2023 was also the hottest year on record due to climate change and El Nino, with the latter generally causing drier conditions every two to seven years. <\/p>\n\n\n\n
Some experts say the US economy is overexposed to climate risks in a similar way that it was overexposed to mortgage risks in 2008, which were a primary cause of the global financial crisis. <\/p>\n\n\n\n
\u201cGiven this picture, it is not far-fetched to believe that climate change has the potential to destabilise the global insurance industry, with ripple effects for South Africa,\u201d said Richman.<\/p>\n\n\n\n
Stress is already emerging in the US, with companies withdrawing coverage from California and Florida. <\/p>\n\n\n\n
\u201cWhile many of the recent events have not been unprecedented, insurers have experienced them as particularly acute losses hitting their bottom lines and capital reserves.”<\/p>\n\n\n\n
“This is due to reinsurers taking significantly less risk from these types of events, leaving insurers unable to smooth out the losses over time.” <\/p>\n\n\n\n
According to research from PwC and Moody’s, reinsurers see climate change as the most significant risk facing the sector, with many reinsurers taking a hit as they accumulate losses from customer-facing insurance companies.<\/p>\n\n\n\n
In response, many are increasing prices, limiting coverage and exiting some markets to improve returns. <\/p>\n\n\n