Economic losses from natural disasters top US$232bn in 2019

The latest catastrophes annual report from Aon reveals that the 409 natural catastrophe events of 2019 resulted in economic losses of US$232bn – 3% below average annual losses for this century, but 20% lower than the previous decade. Of that total, private sector and government-sponsored insurance programmes covered US$71bn of the total. This means the protection gap, which is the portion of economic losses not covered by insurance, was 69% in 2019 – the fifth-lowest since 2000.

The 12-months under review in the Weather, Climate & Catastrophe Insight report witnessed 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 US$9bn and US$6bn in insured losses respectively, due to each storm tracking through a highly urbanised area. The costliest individual peril was inland flooding, which caused economic losses globally of US$82bn, preceded by tropical cyclone, at US$68bn.

From a climate perspective, 2019 was the second warmest year on record for land and ocean temperatures since 1851. Notably, record temperatures of 46.0°C were seen in France and 42.6°C in Germany, while the January to May period was the wettest on record in the United States, with 399 mm of rainfall.

Andy Marcell, CEO of Aon's Reinsurance Solutions business, said: “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. 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.”

2010-2019 marked the costliest decade on record with economic damage reaching US$2.98 trn – some US$1.19trn higher than 2000-2009 and with Asia-Pacific accounting for 44%. Private and public insurance entities paid out US$845bn during the decade with the US accounting for 55%.

The outlook remains challenging. Steve Bowen, director and meteorologist at Aon's Impact Forecasting team, said: “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. 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.”

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