Aon: “Climate-influenced” weather key driver of damage from catastrophes

Aon: “Climate-influenced” weather key driver of damage from catastrophes | Insurance Business

Aon: “Climate-influenced” weather key driver of damage from catastrophes

The latest version of Aon’s annual Weather, Climate & Catastrophe Insight report looks into what happens “when natural disasters and a pandemic collide” – and the results are not pretty.

Aon reported that for 2020, there were a total of 416 natural catastrophe events worldwide that resulted in economic losses of US$268 billion, which is 8% above the average annual losses for this century. The professional services firm noted that this increase is driven by a changing climate, more people moving into hazard-prone areas, and an increase in global wealth.

The report also found that of the US$268 billion total in global economic losses, government-sponsored insurance programmes covered US$97 billion, which leaves a significant protection gap of 64%.

“The global response to the socioeconomic volatility caused by the COVID-19 pandemic has increased focus on other systemic risks – particularly climate change – and is causing a fundamental reordering of business priorities,” said Aon CEO Greg Case.

Key findings of the report include:

  • Over 8,000 people lost their lives due to natural catastrophes in 2020.
  • Tropical cyclone was the costliest peril, causing more than US$78 billion in direct economic damage; it is followed by flooding (US$76 billion) and severe convective storm (US$63 billion).
  • Citing data from NOAA, 2020 was the world’s second warmest since 1880 for land and ocean temperatures at +0.98°C (+1.76°F) above the 20th-century average.

Aon also compiled a list of 2020’s most significant regional catastrophic events:

  • In Canada, the major hailstorm in Calgary in June resulted in a billion-dollar insurance industry pay-out
  • Costliest year on record for global severe convective storms was led by historic US derecho
  • US mainland endured a record-breaking 12 named storm landfalls, including six hurricanes
  • Super Typhoon Goni struck the Philippines as the strongest landfalling storm ever recorded globally at 195 mph
  • Ciara became Europe’s costliest windstorm since Xynthia in 2010
  • Drought conditions reduced agricultural crop yields in Brazil and Argentina, burning 30% of the Pantanal Region
  • The most widespread Yangtze River Basin floods since 1998 caused US$35 billion of economic damage in China's monsoon season

Case said that Aon’s report has highlighted the increasing likelihood of “connected extremes,” and reinforces that leading organisations in the future will be defined by the capability to manage the global implications of concurrent catastrophic events.

“In a highly volatile world, risk remains ever present, is more connected and, as a result, is also more severe – and 2020 has underscored this reality,” the CEO concluded. “It has also emphasised the need for enhanced collaboration between the public and private sectors, which will be essential to close the rising protection gap and build resilience against natural catastrophes.”