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(Bloomberg) -- As 2025 begins with wildfires wreaking devastation across Los Angeles, it’s now clear that insured losses from natural catastrophes last year soared to the highest since 2017.
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At $140 billion, insured losses globally were more than double the 30-year average of roughly $60 billion, according to industry data compiled by Munich Re and published in a report on Thursday.
Hurricanes Milton and Helene, which ripped through the US, ended up being the costliest natural disasters of 2024, the report shows. And this year may already be on track to exceed those losses, as wildfires in the Los Angeles area threaten to be the most financially damaging in history.
Blazes burning around Santa Monica and Malibu are consuming some of the most pricey real estate in the US, affecting areas where the median home value is more than $2 million, according to AccuWeather Inc. The disaster will likely cause between $52 billion to $57 billion in damage and economic loss, the company said.
Fires, along with floods and severe thunderstorms, are what’s known in the insurance industry as non-peak perils, which scientists say are more likely to intensify in tandem with climate change. As a risk category, they’ve also proved harder to offload to capital markets in the form of products such as catastrophe bonds than peak perils like hurricanes.
“Non-peak risks have increased significantly and have accounted for a steadily increasing share of insured losses from natural catastrophes in recent years,” Tobias Grimm, Munich Re’s chief climate scientist, said in an interview.
The overall increase in natural catastrophes has coincided with a rapid rise in temperatures. Last year was the planet’s hottest on record, with the European Union’s Copernicus Climate Change Service recording a global average of 1.62C above pre-industrial levels in November, breaching the critical threshold of 1.5C.
“Science has become more certain that climate change plays a crucial role in making weather disasters more frequent and more extreme,” Grimm said.
Climate change is now upending what had once been considered weather norms. Last year, extreme flooding in Dubai and in Spain’s Valencia region, where more than 200 people died, led to billions of dollars in insurance losses.