The growing frequency and severity of extreme weather events caused by climate change is set to send property insurance prices soaring over the next 20 years, Swiss Re has warned.
In a report published earlier this week, the reinsurance giant's research unit calculated climate-related risks will drive a 22 percent increase in global property premiums, a spike that would equate to around $183 billlion in additional costs.
Overall, the firm expects property insurance premiums will triple to be worth $1.3 trillion in 2040, up from $450 billion in 2020, driven largely by economic development and climate change, with the former expected to make up three quarters of the rise.
Jerome Haegeli, chief economist at Swiss Re Group, said the forecast highlighted the need for the insurance sector to play an active role in driving sustainable economic growth.
"Promoting the conditions for long-term sustainable growth is particularly important in the face of climate change, which poses the biggest long-term threat to the global economy," he said. "If we are to build a sustainable insurance system that allows society to manage and absorb future risks, we need to make risks and opportunities quantifiable. Our work is also vital for policy makers with whom we share the aim of making economic growth insurable."
Swiss RE expects property insurance premiums will triple to be worth $1.3 trillion in 2040.
Climate change is widely blamed for driving a growing number of extreme weather events around the world, from wildfires on the west coast of North America to floods in central Europe. The predictions come just a couple weeks after a rapid attribution study concluded that extreme rainfall events are between 1.2 and nine times more likely to happen in Western Europe than in the late 1800s.
In the new research note, Swiss Re's analysts predict the property and casualty insurance business is going to become "riskier and more complex" over the coming years, with premiums set to more than double across all lines to $4.3 trillion by 2040.
Motor insurance is expected to remain the largest of all property and casualty business lines, but its share will shrink as the property insurance market grows rapidly over the coming 20 years, according to the report.