Natural Catastrophe Economic Losses Hit a Record $353B in 2017: Aon Benfield

Insured losses for last year’s 330 natural catastrophes reached $134 billion, or 38 percent of their economic price tag of $353 billion, according to a report published by Impact Forecasting, Aon Benfield’s catastrophe model development team.

The overall economic cost of natural catastrophes includes weather-related natural disasters, which hit a new record at $344 billion, or 97 percent of the overall total, said the report, titled “Weather, Climate & Catastrophe Insight – 2017 Annual Report.”

On the other hand, insured losses ($134 million) absorbed by the private sector and government-sponsored programs were the second-costliest ever incurred—just behind the record of $137 billion in 2011, the report said, noting that the 2017 total for insured losses is 139 percent higher than the $56 billion reported in 2016.

The reason for this jump is that last year’s natural catastrophes were concentrated in the United States, which had a very active Atlantic hurricane season, severe weather events (convective storms) and wildfires, said the report.

With most of 2017’s losses concentrated in the U.S., the insurance penetration levels would be higher than they were in 2016, when nat cats were spread across the globe, explained an Aon Benfield representative.

The record-breaking weather events across the globe included Hurricanes Harvey, Irma and Maria in the U.S. and Caribbean, plus Typhoon Hato in China and Cyclone Debbie in Australia. For historical context, the report said, 2017’s natural catastrophe losses were 93 percent higher than the 2000-2016 average.

“While 2017 was an expensive year for the insurance industry, the reinsurance market had an estimated $600 billion in available capital to withstand the high volume of payouts,” commented Eric Andersen, CEO of Aon Benfield. “Most critically, the U.S. weather and wildfire events in particular have demonstrated the value of reinsurance, with claims being paid in an average of eight days to augment the recovery process.”

Additional key findings include:

• 36 percent ($80 billion) of economic damage from Hurricanes Harvey, Irma and Maria was insured.
• 31 billion-dollar events occurred globally, with 16 in the U.S. alone.
• Wildfires caused $14 billion of insurance losses in 2017—the highest on record for the peril.
• 10,000 human fatalities were caused by natural disasters, with the deadliest event being a massive landslide event in Sierra Leone when more than 1,100 people lost their lives.
• 2017 was the third warmest year on record since 1880 for combined land and ocean temperatures.

“The high cost of disasters in 2017 served as a reminder that we continue to face increasing levels of risk as more people and exposures are located in areas that are particularly vulnerable to major, naturally occurring events,” said Steve Bowen, Impact Forecasting director and meteorologist.

“As weather scenarios grow more volatile in their size and potential impact, it becomes more imperative than ever to identify ways to increase awareness, improve communication and lower the insurance protection gap. We know natural disasters are going to occur. The question is how prepared are we going to be when the next one strikes.”

Other significant events during the year included:

• An October wildfire outbreak, the most destructive ever recorded in the U.S. state of California, caused nearly $13 billion in economic damage.
• Substantial summer flooding caused more than $12 billion in damage across China.
• Southern Europe endured an extended drought during the summer and autumn months that caused $6.6 billion in damage across parts of Spain, Italy and Portugal.
• Elsewhere in Europe, the costliest thunderstorm event of the year affected central sections of the continent, particularly Poland, and left an economic damage bill of nearly $800 million.
• In Mexico, two powerful earthquakes in September led to nearly $6 billion in combined economic losses, including major damage across Mexico City on the 32^nd anniversary of its historic 1985 tremor.

In its annual report on catastrophes in 2016, Aon Benfield revealed that insured losses from 315 natural catastrophe events amounted to 26 percent, or $54 billion, of overall economic losses of $210 billion.

Top 10 Global Economic Loss Events

1 Subject to change as loss estimates are further developed
2 Includes losses sustained by private insurers and government-sponsored programs

Source: Aon Benfield/Impact Forecasting