AIR Worldwide shares catastrophe-loss report

The ‘protection gap’ between insured and economic losses from catastrophes can be huge, report says

AIR Worldwide shares catastrophe-loss report

Insurance News

By Ryan Smith

The average annual insured loss from catastrophes is about US$86 billion globally, according to a new report from catastrophe modelling firm AIR Worldwide.

The firm recently released its “2018 Global Modelled Catastrophe Losses” report, which details key loss metrics from AIR’s global industry exceedance probability (EP) curve. Based on the report’s findings, AIR estimated that the 1% aggregate exceedance probability insured loss (or the 100-year return period loss) from catastrophes worldwide is almost US$271 billion.

The global aggregate average annual loss (AAL) and exceedance probability loss metrics for 2018 included results from three new models introduced this year – European severe thunderstorm, Southeast European earthquake and flood. The metrics reflect changes in risk as a result of updated models and also include updates to AIR’s industry-exposure databases for the US and Europe.

“After a decade of below-average losses (apart from 2011 and 2017), 2018 will reinforce the fact that preparing for large losses before they occur is critical to continued solvency and resilience,” said Rob Newbold, executive vice president for AIR Worldwide.

According to the report, global economic losses from catastrophes can vastly exceed insured losses. This protection gap highlights the burden on society when disaster strikes, AIR said.

“For the industry, the protection gap can spur innovation in product development,” Newbold said. “In the public sector, governments are recognising the importance of moving from reactive to proactive risk management, especially in countries where risk is well known and a risk-transfer system is not well established. Understanding the protection gap can help governments assess the risks to their citizens and critical infrastructure, and develop risk-informed emergency management, hazard mitigation and public risk-financing strategies to enhance global resilience and reduce the ultimate costs.”


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