Each year, natural disasters around the world destroy assets worth hundreds of billions of dollars.

According to German reinsurance giant Munich Re (MUV2:ETR), losses incurred from natural disasters amounted to $270 billion last year with less than half that figure covered by insurance.

For insurers, it is essential to have in-depth knowledge of risks and how they are developing in order to be able to assess extreme risks and develop new insurance solutions.

UK insurers with large natural catastrophe exposure include Beazley (BEZ), Hiscox (HSX) and Lancashire Holdings (LRE).

Munich Re says: ‘The majority of research findings indicate that weather-related natural disasters are already being influenced by climate change, and that this influence is likely to become even stronger in the future.’

Now, climate organisations are warning 2023 could see an increase in the severity of weather events around the world due to warmer than average temperatures in the Atlantic Ocean and the return of El Niño.

El Niño is a weather phenomenon which warms and cools the tropical Pacific Ocean in a rotation that lasts between one and three years and impacts weather conditions around the world, typically causing increased rainfall in parts of South America, the southern United States, the Horn of Africa and central Asia.

It can also cause severe droughts over Australia, Indonesia and parts of Southern Asia

The last cycle from 2015 to 2017 saw a significant increase in natural disaster claims and led to the hottest year on record in 2016.

The United Nations WMO (World Meteorological Organisation) sees a 70% to 80% chance of El Niño dominating our weather from July onwards with the risk of ‘increased heat, drought or rainfall in different parts of the world’ and generally more frequent extreme weather and climate events.

In addition, the average sea temperature has risen with the UN warning that ‘without exception, positive temperature anomalies are expected over all land areas in the Northern and Southern Hemisphere’ and adding there is a risk the 2016 record is broken.

In the US, NOAA (the National Oceanic and Atmospheric Administration) is forecasting a 40% chance of a near-normal Atlantic hurricane season this year, featuring between 12 and 17 named storms of which between five and nine could become hurricanes, and a 30% chance of a worse-than-normal season.

Hurricanes have become more frequent and more damaging over the last 30 years, and while El Niño typically has a benign effect on storm development an above-normal west African monsoon and higher-than-average Atlantic temperatures could create more energy and create stronger and longer-lived storms.

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