IBS Insurance/Farmer: Climate Change Insurance Losses Surpass $100 Billion for the Fifth Consecutive Time

image

IBS Insurance/Farmer: Climate Change Insurance Losses Surpass $100 Billion for the Fifth Consecutive Time

As the world bids farewell to 2024, experts are highlighting significant risks that await us in the upcoming years, urging preventive measures. Key risks that may impact us in the future include natural disasters caused by climate change, cybersecurity threats, geopolitical tensions, and economic fluctuations.

Murat Çiftçi, CEO of IBS Insurance and Reinsurance Brokerage, commented on the potential major risks of the future, stating, “In connection with climate change, insured losses are expected to exceed 135 billion dollars in 2024, with this trend rising annually by 5-7%. Meanwhile, as cybersecurity threats rapidly grow, global cyber insurance premiums are projected to reach 16.6 billion dollars by 2025. Geopolitical risks and economic sanctions can lead to disruptions in trade and energy lines, while the global debt level is expected to rise to 312 trillion dollars in 2024, increasing the fragility of the financial system.”

Çiftçi noted that in the past decade, risk rankings have shown significant changes depending on global and regional dynamics, adding, “Some risks consistently stand out, while others have increased their impact and moved up the list. Climate change has become a serious threat not only to the insurance sector but to the entire economy. As of 2024, insured losses have exceeded 100 billion dollars for the fifth consecutive year, and this trend is accelerating. Natural disasters such as hurricanes, floods, and severe storms have caused significant insured losses, especially in the US, Europe, and the Middle East. For instance, the total cost of Hurricanes Helene and Milton reached 50 billion dollars. The second important issue is cybersecurity attacks, particularly ransomware attacks, which have posed a major threat. Between 2017 and 2022, the cyber insurance market grew by 32% annually, while SMEs continue to face a cybersecurity protection gap. The growth of cyber risk insurance can be made sustainable with solutions and accessible products suitable for SMEs. Moreover, global trade wars, regional conflicts, and economic sanctions pose significant threats, creating instability in both the economy and the insurance sector. These risks directly impact both the demand for insurance and pricing dynamics.”

Çiftçi identified economic fluctuations and financial risks as other significant agenda items for the future, stating, “The global debt level has reached 312 trillion dollars as of 2024. This has led to changes in interest rates and demand for insurance products. Consequently, there has been an increased shift towards alternative capital sources, especially in the insurance and reinsurance sector. Additionally, social inflation has raised damage costs, particularly in markets like the US and Australia. High legal expenses are causing changes in risk management strategies in these regions. In summary, the changes observed over the past decade demonstrate that the insurance sector must adapt with innovative products and services. For instance, products like parametric insurance and cyber insurance are crucial in addressing new risks and advancing the industry. Innovation and collaboration are key to responding to these dynamics.”

Çiftçi also emphasized the importance of innovative solutions and public awareness campaigns in preparing for risks: “Infrastructure reinforcement projects and parametric insurances that enhance disaster resilience are pivotal. Furthermore, cybersecurity training and affordable products for SMEs can provide protection against digital threats. Political risk insurance products should be widely promoted to mitigate the effects of regional conflicts, and alternative capital instruments like catastrophe bonds should be used to counter economic fluctuations. The insurance sector should take the lead in raising public awareness and providing financial protection by offering innovative solutions to manage these risks.”

Regarding the developments in Syria, Çiftçi stated, “The regime change in Syria carries significant risks not only regionally but globally. The overthrow of the Assad regime could deepen regional instability with power vacuums and increased conflicts, posing serious risks for the insurance sector. Turkey faces higher economic and social costs due to border security and influxes of refugees, while rising geopolitical tensions may generate growth in demand for commercial insurance and reinsurance. Additionally, solutions like infrastructure insurance and political risk insurances could enable the insurance sector to play a critical role amid these uncertainties in both Turkey and the region.”