Rising CPI driven by geopolitical volatility to amplify future peak loss costs, warns Swiss Re

As the world navigates significant geopolitical uncertainty and volatility, oil price developments driven by the ongoing conflict in the Middle East are expected to push consumer price inflation (CPI) higher, potentially increasing insured losses in a peak loss event, according to Swiss Re’s Group Chief Economist, Jerome Jean Haegeli.

Current tensions in the Middle East represent a significant shock to the system, one that simultaneously creates lower economic growth and higher inflation. According to Haegeli, oil price movements provide a clear indication of how CPI could evolve across different price scenarios.

“On the point of higher inflation, we see a magnitude of around 1% to 1.5% increase across the key scenarios for both the US as well as European CPI, with Europe probably being more affected,” said Haegeli.

In terms of what this means for natural catastrophe losses and specifically how peak losses could develop over time, Haegeli said that “a one percentage point increase in consumer price inflation, this will mean for peak loss, meaning a 1-in-10 year event, in 2030, of around a $420 billion insured loss.”

Haegeli further highlighted: “Looking at our analysis from the Sigma reports, this is a shock which is a peak loss shock which would for the reinsurance industry mean solvency ratios decline of around 40% to 50%, so that’s really significant.”

Swiss Re highlights the importance of closing protection gaps in a recent report by the Swiss Re Institute, which revealed that secondary perils, such as severe convective storms (SCS), floods and wildfires, accounted for 92% of global insured losses in 2025.

Reinsurers face a double challenge: high inflation and the growing frequency of secondary perils, which demand disciplined underwriting and strong capital reserves.

The rising cost of claims and repairs, fuelled by inflation, will test the industry’s capacity to manage extreme risk, which will be further tested by both the severity of peak events and the accumulation of smaller, weather-related losses.

Haegeli concluded: “The global reinsurance industry is exactly here to manage the tail, and for that, a well-capitalised reinsurance industry is also really important for the resilience of today’s world, and also making sure that protection gaps continue to decrease.”