A decade of deadly weather
After three years of high levels of losses from natural catastrophes, in 2019 there was a fall in such costs, according to Aon’s “Weather, Climate & Catastrophe: Insight 2019 Annual Report” published on January 22.
The report, which will be of interest to many in the Bermuda re/insurance industry, relates 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 programmes covered $71 billion of the total—6 percent above the century average but significantly lower than the record $157 billion in 2017 and $100 billion in 2018. This means the protection gap, which is the portion of economic losses not covered by insurance, was 69 percent in 2019—the fifth-lowest level since 2000.
According to the Aon report, in 2019 there were 41 billion-dollar economic loss events, and 12 billion-dollar insured loss events, with the two costliest insurance events, typhoons Hagibis and Faxai, occurring in Japan and causing $9 billion and $6 billion in insured losses respectively, due to each storm tracking through highly urbanised areas. The costliest individual peril was inland flooding, which caused economic losses globally of $82 billion; followed by tropical cyclone, at $68 billion.
The report notes that from a climate perspective, 2019 was the second-warmest year on record for land and ocean temperatures since 1851. In particular were record temperatures of 46°C in France and 42.6°C in Germany, while the January to May period was the wettest on record in the US, with 399 millimetres of rainfall.
“Following two costly back-to-back years for natural disasters in 2017 and 2018, there were several moderately large catastrophes, but strong capitalisation has allowed the re/insurance industry to comfortably manage recent losses,” said Andy Marcell, chief executive officer of Aon’s Reinsurance Solutions Business, in a statement on the report.
“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.”
Aon claimed that 2010–2019 marked the costliest decade on record, with economic damage reaching $2.98 trillion—some $1.19 trillion higher than 2000–2009—and with Asia-Pacific accounting for 44 percent. Private and public insurance entities paid out $845 billion during the decade, with the US alone accounting for 55 percent.
Steve Bowen, director and meteorologist at Aon’s Impact Forecasting team, commented: “Perhaps the biggest takeaway from the last decade of natural disasters was the emergence of previously considered ‘secondary’ perils—wildfire, flood, and drought—becoming much more costly and impactful.
“Scientific research indicates that climate change will continue to affect all types of weather phenomena and subsequently impact increasingly urbanised 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.”
A list of catastrophes
Other significant regional events during the year included:
- The wettest 12-month stretch in the contiguous US on record dating back 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 295 km/h 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.
- The globe’s 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).
- Intense multi-year drought and record-setting spring and summer heat led to conditions able to ignite extremely destructive bushfires in Australia. Some 18.2 million hectares burned and more than 2,500 homes were destroyed, likely to result in insured losses topping $1 billion.
The report points out that strong capitalisation has allowed the re/insurance industry to comfortably manage recent major loss experience.
However, it adds, there are potential undercurrents in the market that might affect it in the future.
What is already shifting is the view of individual perils and their associated risks, as there are increasingly multi-peril impacts within a single event
The report concludes: “What is already shifting is the view of individual perils and their associated risks, as there are increasingly multi-peril impacts within a single event.
“A prime example would be a landfalling tropical cyclone that not only has coastal impact, but additionally produces extensive inland damage due to flooding, severe convective storms, and synoptic winds.
“There also remains the continued challenges around the topic of protection gap. With more than 90 percent of catastrophe losses being uninsured in parts of disaster-prone Asia, Latin America and Africa, this is forcing new conversations on how insurance, government, and other sectors seek to mitigate or minimise natural peril risk.
“This may include the development of new insurance schemes such as parametric-based policies or broader catastrophe bonds that can stretch across an entire region, as opposed to a singular market.”
The report can be accessed here - http://thoughtleadership.aon.com/Pages/Home.aspx?ReportYear=2020