Global warming could increase insured hurricane losses by 50%
Insured losses from US hurricanes could rise by nearly 50 per cent under a 2C global-warming scenario, according to new research from reinsurer MS Amlin.
The peer-reviewed study published in the Journal of Catastrophe Risk and Resilience warned that climate change is significantly altering the geography, frequency and severity of hurricane losses.
Hurricane-exposed areas farther up the eastern seaboard that were historically less impacted could see the most dramatic relative increases in insured losses, with New York and Boston facing the steepest increases in risk.
The findings come as the industry grapples with an intensifying mismatch between risk exposure and pricing adequacy, a gap that MS Amlin cautioned could leave communities underprepared for the financial fallout of future storms.
The study found that New York’s insured losses could rise by 64 per cent, while Rhode Island and Massachusetts may see increases of more than 70 per cent in average annual loss.
Florida is projected to see the largest absolute increase, with insured losses rising 44 per cent.
Category 4 and 5 hurricanes with winds exceeding 130 miles per hour could become more frequent, maintaining strength farther north owing to warming ocean temperatures.
The Carolinas may face a 60 per cent increase in losses during major storm years, three times higher than projected increases in Texas.
A repeat of the 2022 hurricane season, which cost $62 billion, could exceed $90 billion in insured losses under the warming scenario.
Andrew Carrier, the chief executive of MS Amlin, spoke on a global panel discussing climate resilience in the insurance sector, where he highlighted the stark reality of the increasing imbalance between risk and pricing.
He said risk appears to be rising faster than recognition or response.
“While this study points to a need for stronger building codes along the US northeast and mid-Atlantic coast, aligned with hurricane-prone regions like Florida and Louisiana, at the same time, there seems to be a widening gap between risk and readiness,” Mr Carrier said.
He added that asymmetry in the market is becoming more pronounced.
“Climate-related losses are rising, yet pricing and coverage terms are failing to keep pace,” he said. “Insurers can act as climate shock absorbers for society, but only if risks are priced and structured in line with today’s reality.”
Sam Phibbs, coauthor of the study and MS Amlin’s head of catastrophe research, said the findings showed that major storms could increasingly impact cities that have historically seen few hurricanes.
“Warmer oceans will allow hurricanes to maintain their intensity further north and will push significant new risk into areas less prepared to absorb it,” Dr Phibbs said.
He warned that the 50 per cent figure likely underestimates the full impact, once sea level rise, urban growth or more intense rainfall is taken into account, factors that would further increase financial losses.
The research, titled The Impact of Climate Change on Hurricane Wind Losses in the US, was authored by MS Amlin’s catastrophe research team and external collaborators.
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