The past decade broke new records in terms of economic damages and insured losses, according to Aon’s latest catastrophe report.
The costs to global economies reached $2.98 trillion between 2010 and 2019, which was $1.19 trillion higher than 2000-2009, said Aon, noting that Asia-Pacific accounted for 44 percent of the total. During the same decade, Aon continued, private and public insurance entities paid out $845 billion, with the U.S. accounting for 55 percent of that number.
Aon emphasized that the financial costs are only going to increase as a result of climate change which is increasingly affecting urbanized areas “so building resilience is key.”
Addressing the losses of 2019, Aon revealed that the 409 natural catastrophe events of 2019 resulted in economic losses of $232 billion – 3 percent below average annual losses for this century, but 20 percent lower than the previous decade.
Of that total, private sector and government-sponsored insurance programs covered $71 billion – 6 percent above the century average but significantly lower than the record of $157 billion in 2017 and $100 billion in 2018, said Aon. This means the protection gap, which is the portion of economic losses not covered by insurance, was 69 percent in 2019 – the fifth-lowest since 2000, according to Aon in its report titled “Weather, Climate & Catastrophe Insight: 2019 Annual Report.”
During 2019, there were 41 billion-dollar economic loss events, and 12 billion-dollar insured loss events, with the two costliest insurance events, Typhoon Hagibis and Typhoon Faxai, occurring in Japan and causing $9 billion and $6 billion in insured losses, respectively, said Aon, attributing the high price tag to the fact that each storm tracked through a highly urbanized area.
The costliest individual peril last year was inland flooding, which caused economic losses globally of $82 billion, followed by tropical cyclone at $68 billion.
From a climate perspective, 2019 was the second warmest year on record for land and ocean temperatures since 1851 (when records began), said Aon. Notably, record temperatures of 46.0°C (114.8°F) were seen in France and 42.6°C (108.7°F) in Germany, while the January to May period was the wettest on record in the United States, with 15.71 inches (399 millimeters) of rainfall.
“Following two costly back-to-back years for natural disasters in 2017 and 2018, there were several moderately large catastrophes, but strong capitalization has allowed the re/insurance industry to comfortably manage recent losses,” commented Andy Marcell, CEO of Aon’s Reinsurance Solutions business.
“However, as socioeconomic patterns further combine with scientific factors such as climate change or extreme weather variability, the potential financial costs at play are only going to increase so building resilience is key,” he added.
“Perhaps the biggest takeaway from the last decade of natural disasters was the emergence of previously considered ‘secondary’ perils – such as wildfire, flood, and drought – becoming much more costly and impactful,” said Steve Bowen, director and Meteorologist at Aon’s Impact Forecasting team.
“Scientific research indicates that climate change will continue to affect all types of weather phenomena and subsequently impact increasingly urbanized areas. As the public and private sectors balance an understanding of the science with smart business solutions, this will lead to new advances that lower the physical risk and improve overall awareness,” he added.
Other significant regional events during the year included:
- Wettest 12-month stretch in the contiguous U.S. on record dating to 1895 with river flooding across the Mississippi River watershed causing more than $20 billion in economic losses
- Category 5 Hurricane Dorian made multiple landfalls in The Bahamas as a 185 mph (295 kph) storm; tying with the 1935 Labor Day Hurricane as the strongest landfalling storm on record in the Atlantic Ocean
- Cyclone Idai in Mozambique caused the most substantial humanitarian crisis killing 1,303 people and destroying more than 300,000 homes with $2 billion economic losses.
- Windstorm Eberhard was the lone event in Europe to surpass $1 billion in insured losses after tracking across Western and Central Europe in March.
- Deadliest earthquake occurred in Albania on November 26, killing 52 people
- Monsoon rains led to a combined $25 billion in flood-related damage in China ($15 billion) and India ($10 billion) alone
- Intense multi-year drought and record-setting spring and summer heat led to conditions able to ignite destructive bushfires in Australia. Some 18.2 million hectares (46 million acres) burned and more than 2,500 homes were destroyed, likely to result in insured losses topping $1 billion.
*This story ran previously in our sister publication Insurance Journal.