A new report from Gallagher Re suggests that insured losses from a single event or a series of large events would need to be $115 billion to $125 billion above expected average annual catastrophe losses to have a significant impact on the pricing trajectory of the property reinsurance/insurance industry.
The findings come from the global reinsurance brokerage and advisory firm’s Natural Catastrophes and Climate Report Q1 2026, which highlights relatively low and manageable levels of high-cost natural catastrophe activity in the first quarter of the year.
Gallagher Re said this environment provides good support for insurers’ annual catastrophe budgets, putting the industry in a better position to absorb the cumulative impact of future major individual events as well as more frequent medium-sized losses.
The company estimates total economic losses from all natural disasters to be at least $58 billion, about 12% below the 1Q10 average.
Of this total, losses covered by private insurance companies and public insurance entities totaled at least $20 billion, down 26% from the ten-year average. The figure is in line with estimates in Aon’s first-quarter global catastrophe review.
Elsewhere in the report, Gallagher Re highlights the growing impact of severe convective storms (SCS) (i.e., tornadoes, hail and straight-line winds) in the United States, as well as a complex web of hazard and non-catastrophe drivers, resulting in a steadily increasing cost trajectory for insured losses due to hazards since 2008.
Since 2008, the industry’s total nominal (real) losses have exceeded $20 billion nine times, exceeded $30 billion five times, and exceeded $50 billion each of the last three consecutive years (2023-2025) alone.
The Gallagher Re report found that macroeconomic and socioeconomic forces, rather than weather or climate factors, were primarily responsible for the increase in losses.
The company added: “An estimated 80%-90% of the annual nominal increase in U.S. South China Sea losses this century can be attributed to non-disaster-related factors, including rising replacement costs, social inflation, greater vulnerability exposure, growth in construction and labor costs, and wild swings in global oil/energy prices, which drive up asphalt material prices.”
Gallagher Re continued: “The post-2008 SCS loss environment has been significantly impacted by claims inflation and labor market constraints. The rise of allocation of benefits (AOB) agreements, an increase in claims litigation, ‘neighborhood’ and fraudulent claims further increases loss adjustment expense (LAE) costs. While regulatory reforms in some states have dampened AOB activity, the broader trend of rising costs per claim continues to challenge the insurance industry.”
Steve Bowen, chief scientific officer at Gallagher RE, commented: “The increase in SCS losses in the United States since 2008 has been alarming. While climate change continues to affect weather patterns, its direct link to the increase in SCS loss costs over the past nearly 20 years has remained less clear.
“When looking deeper into broader socioeconomic and macroeconomic factors, it is clear that volatility related to energy markets, construction/labor costs, social inflation and how/where people live are the main drivers of these higher losses.
“Recognizing and incorporating these critically important factors remains at the core of effective underwriting, pricing and portfolio management. How we limit future loss volatility will depend on building smarter, more resilient structures, but also on understanding the scientific facts of the dangers.
“This is particularly important as externally installed technology is more expensive and the growth of data center risks adds new loss potential.
“The insurance industry must continue to broaden its perspective and consider additional macroeconomic, socioeconomic, geopolitical and scientific factors when assessing SCS loss potential. This is true not only in the United States, but also internationally, as SCS losses continue to increase in Europe, Asia and Oceania.”