Extreme weather means extreme insurance costs in 2019

Climate Economy

Extreme weather means extreme insurance costs in 2019

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Bigger storms mean bigger tolls on insurers–and higher premiums for the rest of us

Weather-related incidents drove virtually all of the insured natural disaster losses in 2019. Estimated direct economic losses and damage from natural disasters in 2019 are at $232 billion, according to new research from Aon, a leading global reinsurer. Weather-related losses worldwide totaled $229 billion, which is 17 percent higher than the 21st Century average. Global thunderstorm-related damage alone topped $30 billion in 2019 for the tenth consecutive year. The costliest individual peril was inland flooding at nearly $82 billion, closely followed by tropical cyclones ($68 billion). 

2010-2019: The Globe’s Costliest Decade

Earthquakes. Tsunamis. Tropical cyclones. Severe Convective Storms. Inland flooding. Wildfires. Droughts. Extreme heat. Extreme cold. The 2010-2019 period featured record-breaking instances for each of those particular perils. Economic losses from deteriorating weather from 2010-2019 marked the costliest ever. Total direct economic damage and losses tallied $2.98 trillion – $1.1 trillion higher than the previous decade (2000-2009), $1.8 trillion. Across the world nation after nation registered their costliest economic, natural disasters on record. This included Thailand, Puerto Rico, Mozambique, Chile, Haiti, New Zealand, Nepal, and Brazil. Record economic losses equated to record payouts by the re/insurance industry. Private and public insurance entities paid out $845 billion during the decade. The U.S. accounted for $453 billion of that total alone; or 54 percent. 

In Most Major Disaster Events, Virtually all Losses are Uninsured

The decade also further highlighted the significant protection gap that persists in developing and emerging countries. The protection gap is the portion of economic damage not covered by insurance. No part of the world was more vulnerable to this topic than in Asia, where just 12 percent of financial losses – $152 billion out of $1.24 trillion – were covered by insurance. In addition to Asia, there remains a major protection gap issues across Latin America and Africa. This means that, and local populations are entirely dependent on financial support from the federal government or international aid agencies for recovery. The development of new insurance schemes, such as parametric insurance, insurance risk pools, or catastrophe bonds, will be critical new ways to improve risk mitigation in the most vulnerable areas.

Written by

Peter McKillop

Peter McKillop is the founder of Climate & Capital Media, a mission-driven information platform exploring the business and finance of climate change.