Welcome to the latest edition of WTW's Natural Catastrophe Review, a biannual publication that brings insights from our experts, including WTW’s Research Network, to examine recent natural disasters, lessons learned and emerging trends. Offering a smarter way to risk, this report goes beyond the numbers to provide new perspectives to help with natural catastrophe risk management and resilience across multiple sectors.
This edition delves into the physical, vulnerability and socioeconomic factors that contributed to the largest natural disasters in the second half of 2023 (Figure 1) and examines the overarching themes of the year. It also provides an outlook for early 2024, focusing on the ongoing El Niño in the Pacific and winter windstorm forecasts for the European North Atlantic region.
As 2023 drew to a close, the economic and societal impacts of "secondary" perils became a focal point for risk managers following a year dominated by severe convective storms (SCSs), wildfires, droughts and floods. In the U.S., insurers saw the costliest SCS year on record, with total claims exceeding $50 billion. Meanwhile, in the second half of 2023, Hawai'i witnessed its deadliest wildfire in recent history, claiming over 100 lives.
In Europe, northern Italy faced an unprecedented hailstorm, and certain countries — including Portugal, Spain, Italy and Greece — were hit by severe wildfires. The Panama Canal experienced its worst drought since it opened in 1914, leading to major global shipping disruptions. And flooding caused destruction globally, with notable events in Slovenia, New York City, Hong Kong and Beijing. Storm Daniel, in particular, brought extensive flooding to the Mediterranean region, culminating in catastrophic dam failures in Derna, Libya.
Beyond economic damages, numerous disasters in 2023 highlighted the need for a proactive approach to risk identification, mitigation and adaptation. In a world increasingly shaped by aging infrastructure, climate change and urban growth into risk-prone areas, we are now facing disasters that were either not anticipated or deemed unlikely just a few decades ago. This evolving situation necessitates a pivot toward not just recognizing but actively preparing for a wider array of risks, some of which might have been previously dismissed or underplayed.
One way risk managers can tackle this challenge is by examining how historical events could have resulted in worse outcomes, also known as downward counterfactual analysis. For example, in 2018, Hawai'i experienced wildfires very similar to those in 2023 affecting West Maui (Section 2.3). Although the 2018 fires were less severe, exploring how they might have escalated could have better prepared risk managers for the significantly more destructive wildfires in 2023. Similarly, a 2022 research paper on historical flooding in Libya warned that a recurrence of a major event, such as the devastating 1959 floods, could result in dam failures in Derna. Despite this prediction, the warnings went unheeded, and the anticipated risk materialized following storm Daniel in 2023 (Section 2.9).
The importance of such foresight cannot be overstated, especially given that the historical record alone does not capture the full range of potential risks from rare natural hazards. By examining what-if scenarios, organizations and governments can gain insights into potential vulnerabilities and develop strategies for a more resilient future.
According to the EU’s Copernicus Climate Change Service, the global mean temperature rose to a remarkable 1.48°C above the pre-industrial (1850 – 1900) average in 2023, surpassing the previous record of 1.25°C jointly held by 2016 and 2020. The scale of the warming was evident as seven months of the year marked their highest temperatures on record. The oceans also saw exceptional warmth, with global sea-surface temperatures (SSTs) at record monthly highs from April through December, notably in the eastern North Atlantic, Gulf of Mexico, Caribbean and large parts of the Southern Ocean. Meanwhile, Antarctic sea ice endured its smallest maximum extent in the satellite era (Section 2.13).
These records provided a backdrop to the 28th Conference of the Parties (COP) in Dubai, where a new global agreement laid the ground for a transition away from fossil fuels and included significant commitments to triple renewable energy capacity and double energy efficiency by 2030. Despite these efforts, the International Energy Agency noted that the current trajectory suggests the 1.5°C Paris Agreement target will be challenging to achieve.
In 2023, global insured losses exceeded $100 billion for the fourth consecutive year, after adjusting for inflation. Echoing previous years, the world faced a considerable protection gap, with total economic losses surpassing $350 billion. A year recording more than $100 billion in insured damages is now more of a norm than an aberration, reflecting growth in exposures and inflation. Secondary peril losses, primarily severe convective storms in the U.S. and Europe, contributed substantially to the year's insurance claims, underscoring their growing influence. In Section 2.1, WTW’s Cameron Rye reviews the record-breaking SCS damages in the U.S., emphasizing the need for risk managers to redefine expectations of an “average” year for this peril in the 2020s. Meanwhile, in Section 2.2, an article led by Michael Kunz and Jannick Fischer from the Karlsruhe Institute of Technology examines July's gargantuan hail in northern Italy through a climate change lens.
The North Atlantic became a focal point of discussion in 2023 due to a clash between exceptionally warm SSTs — typically a catalyst for heightened hurricane activity — and the presence of El Niño, which is historically associated with the suppression of storminess. In Section 2.6, James Done of the National Center for Atmospheric Research analyzes the season, marked by many storms but few landfalls. He delves into the reasons for the warm SSTs and questions whether climate change is altering the historical ENSO-tropical cyclone relationship. In Section 2.7, the focus shifts to the northern Pacific, where WTW’s Jessica Boyd discusses the ocean’s tropical cyclone activity in 2023, marked by two particularly damaging storms, Doksuri and Otis, that underwent rapid intensification before landfall.
As in previous years, 2023 sparked discussions on disaster preparedness, emergency response and resilience. In Section 2.3, WTW’s Daniel Bannister reviews the year’s major wildfires, highlighting how human actions and societal decisions played a significant role in the severity of several disasters, including the deadly Hawai'i fires. Flooding also raised questions, particularly in relation to the readiness of urban areas to manage flash flood risks in a warmer world. In Section 2.10, an article led by WTW’s Neil Gunn and Newcastle University’s Chris Kilby examines the flood events in New York City and Hong Kong, showcasing the benefits of resilient urban design and high-resolution modeling.
El Niño is expected to continue into 2024. In Section 3.1, WTW's Scott St. George explores its implications for global weather patterns, focusing on regional water supplies and renewable energy production. This phenomenon can significantly alter rainfall, potentially causing droughts or floods, thereby impacting water availability. At the same time, renewable energy sources may be affected. For instance, shifting weather patterns could reduce wind energy generation in some parts of the world. Recognizing and adapting to these changes is crucial for effective water resource management and ensuring consistent renewable energy production during El Niño's influence.
Amid 2023’s weather and climate records, we must not forget the devastating Kahramanmaraş earthquakes in Türkiye in February (WTW's H1 Natural Catastrophe Review) and the Mw 6.8 earthquake in Marrakech, Morocco, in September. In Section 2.12, Ross Stein and co-authors from Temblor review the Morrocco earthquake, highlighting the rarity of the event, which struck in a remote part of the Atlas Mountains. Another geological risk that made headlines in 2023 was the volcanic unrest at Campi Flegrei near Naples, Italy. In Section 3.3, WTW’s James Dalziel explores the science behind the headlines, including the likelihood and consequences of an eruption of this supervolcano.
|Natural Catastrophe Review July - December 2023
Date: Wednesday 31 January 2024
Session: 15:30pm - 17:00pm GMT (In-person & Virtual)