While increasingly hostile weather has played a role in growing annual catastrophe losses that now average $132 billion globally, it’s actually non-hazard factors such as oil prices, construction materials, and labor costs that account for 80-90% of the cost. That’s the surprising research finding from global reinsurance broker Gallagher Re. The lines between “primary” and “secondary” perils also need rethinking.
Former Florida Deputy Insurance Commissioner Lisa Miller sits down with the chief researcher, and with the chief risk officer of one of Florida’s largest property insurance companies to discuss the importance of considering these non-hazard factors in rate calculations, and the need for better building codes, resilience efforts, and potential legislative incentives to mitigate risks and reduce costs.
Show Notes
Joining Host Miller are Steve Bowen, Gallagher Re’sChief Science Officer and researcher behind the Q1 2026 Gallagher Re Natural Catastrophe and Climate Report, and Ryan Hodges, Senior Vice President of Risk Management for American Integrity Insurance Company, headquartered in Tampa, Florida. The focus was on the practical implications the research findings have for insurance companies, reinsurers, policymakers, builders, and consumers alike. Miller opened the discussion by noting that global insured catastrophe losses now average approximately $132 billion annually and that severe convective storms − including thunderstorms, hail, tornadoes, and straight-line winds − have become major contributors to those losses.
The Rise of “Non-Hazard” Cost Drivers
While climate and weather patterns certainly matter, the Gallagher Re report concludes they account for only about 10% to 20% of the increase in insured losses over the past two decades.
“When you're looking at the overall frequency of events, there's not really any data that suggests that we're seeing an overall increase in the number of the events themselves,” said Bowen, who is also a meteorologist. “We’re starting to see some emerging signs that events are behaving a bit more radically, there’s more volatility than what we've seen before in the past, but it wasn't enough of an obvious signal for us to feel like this is really what's driving why losses continue to go up.”
The report found that 2008 marked a major shift in replacement and exposure costs, and identifies several major non-hazard contributors to the remaining 80% to 90% of rising loss severity, including:
- Oil price increases affecting asphalt roofing materials
- Rising labor and construction costs
- Supply chain disruptions
- Inflation and consumer price index increases
- Claims litigation and social inflation
- Urbanization and population growth in exposed regions
All of the above have led to the majority of higher replacement costs following catastrophes.
Urbanization and the Expansion of Risk
One of the non-hazard factors noted is the increasing concentration of... (For full Show Notes, visit https://lisamillerassociates.com/episode-64-hidden-cost-drivers-of-severe-storms/)
