Global Catastrophe Losses Decline, But Risk Remains Elevated

In the first half of 2026, global insured natural catastrophe losses totaled approximately US$42 billion, marking a 16% decline from the ten-year average and the lowest figure for this period since 2020, according to the Swiss Re Institute. However, stakeholders in the insurance sector are advised not to mistake this dip for a long-term reduction in risk. Severe convective storms were responsible for the bulk of these losses, accounting for about US$28 billion, also below the expected long-term trends.

This reduction in losses can be attributed more to geographic factors rather than an actual decrease in natural hazards. Storm activity within the United States remained above average, yet the incidence of high-impact weather events in traditionally vulnerable areas like Texas and the Southeast was notably low. These regions typically generate significant insured losses due to their blend of frequent storms and high concentrations of insured assets.

Insurance covered roughly 42% of economic losses in this period, surpassing the 30-year average of 33%. This statistic reflects concentrations of damage occurring in markets with substantial insurance coverage rather than indicating a structural enhancement in global insurance penetration.

In stark contrast, the situation in Venezuela illustrates this protection gap starkly. A recent earthquake sequence there caused estimated economic losses of US$20 billion, with minimal insurance coverage likely to provide only a fraction of the necessary recovery funds.

Balz Grollimund, Head of Catastrophe Perils at Swiss Re, emphasized that the lower loss figures shouldn't be interpreted as a sign that risks have diminished. "A less costly first half of the year does not mean the risk has gone away,” he warned. “The potential for one major hurricane, earthquake, or wildfire can swiftly alter the situation." 

Interestingly, Swiss Re's research reveals that wildfires represent the fastest-growing peril related to weather. In Europe, insured wildfire losses have increased by 8% to 11% annually in real terms since 1970. Additionally, the continent now experiences 64% more hot days, defined as any day medaling 30°C or above, compared to the 1950s. This summer set the stage for an active wildfire season, with major incidents occurring in France and Spain.

Grollimund underscored that the recent fires occurring in Europe are indicative of hotter, drier conditions leading to a greater likelihood of significant wildfires. As development continues in these vulnerable areas, costs associated with wildfire damage are expected to increase. Wildfire losses in Europe have surged consistently since 1970, which is creating widening gaps in pricing and modeling for brokers serving clients exposed to these risks.

While the quiet first half has been welcomed, it does little to assuage fears of a financially damaging latter half. Historically, the second half of the year accounts for an average of 58% of total global insured nat cat losses, primarily fueled by hurricanes in the North Atlantic.

Though El Niño conditions generally correlate with suppressed hurricane activity in this region, they don’t eliminate the risks of landfall altogether. Remarkably, 22% of US hurricane landfalls since 1950 occurred during years classified as El Niño. This phenomenon can also transfer risk dynamics in unpredictable ways to the Central and Eastern Pacific while altering flood and wildfire risks elsewhere.

El Niño is anticipated to strengthen and maintain a 97% probability of persistence into early 2027, effectively redistributing catastrophe risk from the Atlantic to the Pacific, alongside increasing drought and wildfire conditions.

The fundamental cost drivers—for instance, growing exposure in hazard-prone areas and rising reconstruction expenses—remain unaltered despite seasonal variations. Swiss Re noted that enhancing resilience and addressing underlying risks will be crucial for maintaining the affordability and availability of insurance solutions. 

It's essential to interpret the current market signals cautiously. A dip in losses during the first half of the year doesn't suggest a shift in renewal pricing strategies, which should continue to align with multi-decade trends in wildfire and hurricane activity instead of the preceding six months.

Brokers working with clients in wildfire-dense regions—such as southern Europe, the western US, and Australia—can leverage Grollimund’s statistic of 8-11% yearly growth in their discussions about premium increases, moving the conversation towards enduring structural trends rather than isolated quiet seasons. 

For those dealing with Atlantic hurricane risk, the 58% second-half loss average warrants caution in how mid-year rate adjustments are considered, driving home the need to evaluate decisions against historical patterns rather than the current tranquility. Brokers advising on Pacific or drought-affected areas should proactively address the intensifying El Niño signals, as they shift catastrophe risks toward less familiar areas.