“How climate change is influencing each individual type of peril is becoming more prevalent,” said Bowen, adding that it is affecting some more than others. 

Speaking to The Insurer TV, Bowen referred to the impact of changes in temperature. 

“We’re definitely seeing more enhancements in terms of these extremes, whether it’s extreme cold or extreme heat so it’s not much of a surprise there’s tropical cyclone behaviour. Ida was yet another example of a storm rapidly intensifying up to the point of landfall,” he explained. 

Steve Bowen, Head of Catastrophe Insight, Impact Forecasting, Aon

“We continue to see ocean waters warming and environmental conditions becoming more favourable for this type of rapid intensification. It’s definitely becoming more tangible and we’re starting to see more real time examples of this happening that we can point to and say, climate change is here and it’s causing more impact,” Bowen added. 

And the industry is paying for it. 2021 will be another expensive year from the nat cat insurance industry with losses expected to once again, exceed the $100bn threshold. 

Insured and economic AAL by region*

“We’ve actually now hit that threshold in four of the past five years,” said Bowen. “So we’re talking about another expensive year for the industry and economic losses again are probably going to be getting into that $300bn range by the time it gets to the end of the year.

“Just based on the level of damage we continue to see now, into the early part of the fourth quarter, it’s going to be an expensive year - not a historic year by any means - but definitely one that’s been quite active and driven by a lot of these large scale events,” he said.

Large scale events this year have included the Texas freeze storm, European flooding, wildfires in both the US and Europe, and Hurricane Ida, with its unexpected tracking and significant levels of rainfall. 

Focus on floods 

However, for Bowen, the floods across parts of Europe amalgamated to become the biggest “eye-opening” event in 2021.

“I think what happened in Europe this summer was really eye-opening. We saw so much extreme rainfall which led to really historic levels of damage and in parts of Germany, we’re talking about one of the costliest events on record for the German insurance industry,” he said. 

Discussing the flood peril more generally, Bowen said, the industry can “often forget” just how expensive the flood peril can be and that more work needs to be concentrated on the coverage.

“The previous benchmark was always the Thai floods in 2011, and we really hadn’t seen that $10bn plus industry loss from this peril, but what we saw in July definitely reinforced the notion that this is something we need to be thinking a lot more about even if it can be a bit of a mess in terms of how the flood peril is covered in various parts of the world,” he said. 

Steve Bowen, Head of Catastrophe Insight, Impact Forecasting, Aon 2

On the coverage point, Bowen said: “There are different types of policies which flood gets bundled into. We know in the US, there’s been a lot of challenges around the national flood insurance programme and how folks have to buy separate policies as opposed to in Europe where it might be bundled up with more traditional policies.

“So, how we’re handling that peril and how we’re trying to lower that protection gap and make sure that when we do see these larger scale flood events that more people are able to gain access to funding to be able to help get them back on their feet a bit more quickly, is important.”

APCIA

Speaking to The Insurer TV ahead of the APCIA event which closes in Denver today, Bowen expected the two main talking points in relation to US cat activity to be the Texas freeze and Hurricane Ida.

“What happened in Texas in February - I mean we’re talking about an upwards of $15bn insured loss from that winter weather - tells us we really need to be talking around the liability in litigation aspect of this and making sure we’re taking the proper precautions to modernise infrastructure to really do the things that are necessary to limit the type of damage that we’ve seen from this peril.”

On Ida, Bowen’s biggest concern is that the hurricane is a prime example of storms taking longer to weaken once they come ashore. 

“So, once they do, they’re still capable of producing significant impacts and like we’ve seen in the North East where the remnants of Ida, combined with frontal boundary, created a fire hose of moisture which entered the North East which led to many many many billions of dollars worth of damage,” he explained.

As a result of the changing outcomes of these events, the industry must change its mindset, said Bowen, and this should be the centre of some of the conversations taking place at this year’s APCIA.