Only 38% of 2021’s Natural Disaster Losses of $343B Were Covered by Insurance: Aon

January 26, 2022 by L.S. Howard

Natural disasters cost global economies a total of $343 billion in 2021, compared with $297 billion in 2020, according to Aon’s “2021 Weather, Climate and Catastrophe Insight” report.

Insured losses from 2021’s natural disasters reached $130 billion, which was well above the 21st century average ($74 billion), median ($66 billion) and 18 percent higher than in 2020, said Aon.

However, only 38 percent of global economic losses were covered by insurance, which translates into a global protection gap of 62 percent. This is down slightly from the 63 percent insurance gap in 2020 and the second lowest on record behind 2005 (60 percent).

The economic cost solely of weather and climate-related events—defined as events caused by atmospheric-driven phenomena—totaled $329 billion, the report said, noting that this was the third-highest loss on record for such events, after adjusting for inflation, only behind 2017 and 2005.

While the cost of losses was up from 2020, the number of notable disaster events slightly decreased, which demonstrated the heightened costliness and severity of these events, said Aon. The number of disaster events recorded in 2021 were 401, down from 430 in 2020. (See below for the criteria Aon uses to classify natural disasters).

Other key findings from the report include:

“Many global communities are exposed to increasingly volatile weather conditions that are in part enhanced by the growing effects of climate change. This includes record-setting episodes of extreme temperatures, rainfall and flooding, droughts and wildfires, rapidly intensifying tropical cyclones and late season severe convective storms,” said Steve Bowen, meteorologist and head of Catastrophe Insight at Aon, in a statement.

“We can no longer build or plan to meet the climate of yesterday. With physical damage loss costs rising, this is also leading to lingering global disruptions to supply chains and various humanitarian and other asset-related services. The path forward for organizations and governments must include sustainability and mitigation efforts to navigate and minimize risk as new forms of disaster-related volatility emerge,” he added.

“Clearly, there is both a protection and innovation gap when it comes to climate risk,” said Eric Andersen, president of Aon. “As catastrophic events increase in severity, the way that we assess and ultimately prepare for these risks cannot depend on solely historical data. We need to look to technology like artificial intelligence and predictive models that are constantly learning and evolving to map the volatility of a changing climate.”

An event must meet at least one of the following criteria to be classified as a natural disaster in the Aon’s Catastrophe Insight Database:

Source: Aon/Impact Forecasting

Photograph: Debris in a street after flooding in Schuld near Bad Neuenahr, western Germany, on July 15, 2021. Photo credit: Bernd Lauter/AFP/Getty Images