Aon’s 2024 Climate and Catastrophe Report, focusing on the Asia Pacific (APAC) region, presents a nuanced understanding of natural disasters and climate change implications, emphasising the economic impacts and the pressing need for enhanced insurance coverage.
The study reported that in 2023, the world saw 398 natural disasters, leading to economic losses of US$380 billion, marking a significant increase from the average losses of the previous decades. This surge was notably influenced by major seismic events and severe weather disturbances across the globe.
In APAC, economic damages were primarily due to catastrophic flooding in China and severe droughts in India, accumulating to US$65 billion in losses. This figure represents a significant decrease from the region's long-term average, yet it unveils a critical challenge: a vast majority of these losses were uninsured.
With only 9% of the economic damages covered by insurance, the region faced a stark “protection gap,” underscoring an urgent call to expand insurance protection.
George Attard, CEO of reinsurance solutions at Aon's APAC region, emphasised the indirect impacts of climate change on the top risks businesses face.
“The findings from Aon's 2023 Global Risk Management Survey for Asia Pacific demonstrate that although climate change is not featured in the top 10, it directly impacts four of the top 10 risks for businesses, that is business interruption, rapidly changing market trends, supply/chain distribution failure and regulatory or legislative changes,” he said. “With climate driving new extreme weather records, businesses increasingly need to quantify and address the direct and indirect impact of climate risk.
“Businesses must therefore leverage advanced analytics and experts to help analyse climate trends and make better decisions to address risks and increase the resiliency of their operations, workforces, and the communities they impact.”
The report highlighted that APAC has been consistently vulnerable to flooding, with damages exceeding US$30 billion annually since 2010. The year 2023 continued this trend, with China's floods contributing significantly to the region's overall losses. These events reveal significant gaps in protection, especially in areas newly exposed to such extreme weather conditions.
“The 2024 Climate and Catastrophe Insight report highlights the vulnerability of the region to disasters and how the lack of insurance exacerbates business risks,” said Brad Weir, head of analytics for reinsurance solutions in Asia at Aon. “With climate variability, we see natural hazards impacting areas that in recent times may have been largely unaffected, meaning those communities are generally under-prepared and may not have adequate insurance in place. Closing the protection gap will therefore continue to pose a challenge but also a huge opportunity for Asia Pacific. There is a growing need for advanced climate modelling and risk assessment analytics for better disaster preparedness and planning to reduce risk, protect lives, and promote resilience.”
Last month, Aon launched a tool to help clients better visualise and understand their exposure to physical climate risks.
